The U.S. Supreme Court’s Tuesday-issued decision about arbitration clauses in agreements between fleets and their independent contractors most directly affects single-truck, interstate owner-operator set-ups, says Braden Core, a transportation attorney at the firm Scopelitis, Garvin, Light, Hanson & Feary.
Though the ruling was somewhat narrow in its scope, the segment of the industry it impacts is large, he says. He described the ruling as “a broad holding that applies across the country” to “any owner-operator who looks like the plaintiff in the case — a one man, one-truck operation in which he was personally driving the truck.”
The nation’s high court on Tuesday handed a victory to owner-operator Dominic Oliveira, who challenged the arbitration agreement he made with his carrier, Prime Inc. In an 8-0 decision, the Supreme Court ruled that arbitration clauses within independent contractors agreements between fleets and owner-operators aren’t binding under federal law.
The Justices answered only the “narrow questions” brought before it, Core says. Those questions were whether independent contractors have a “contract of employment” with their carriers and, thus, whether contractors are exempt from the Federal Arbitration Act enacted in 1925.
The court answered yes to both of those questions. Now, lawsuits made against fleets from owner-operators can’t be forced into arbitration, even if their contractor agreements include an arbitration clause. Instead, courts will determine whether lawsuits brought by contractors against their carriers will be heard in court or by an arbitrator.
However, the decision only applies to federal law, meaning its impact on independent contractor agreements could be limited, as fleets could still try to force arbitration under state law, says Bob Roginson, chair of firm Ogletree Deakins’ trucking and logistics group.
“It does not impact [carriers’] ability to rely on state law,” he said. “Carriers are going to need to go back and look at state arbitration laws in the states where they operate or where they have these agreements” to see if they’re enforceable at the state level, Roginson says.
The ruling only applies to interstate operations, he says, and doesn’t affect contractors and carriers in intrastate operations.
Core agrees that carriers will now have to examine state law to try to enforce arbitration agreements. However, state law in many cases “isn’t as favorable as the federal law was” regarding binding arbitration agreements, Core says.
As noted in Overdrive‘s coverage on Tuesday, Oliveira can now proceed with his original 2015 lawsuit against Prime, which challenged his classification as a contractor. He argues he should have been classified as an employee.
The Supreme Court made no judgment on those claims. The case before the court centered only on the questions regarding arbitration clauses.
Oliveira’s legal team lauded the Supreme Court’s decision Tuesday, saying in a statement that the “decision will enable so many drivers like Dominic who are not being paid what the law requires to go to court and fight for their rights.”