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New Prime v. Oliveira Part II: Federal Arbitration Act Section One “Contracts of Employment” Exemption Includes Independent Contractors

February 1st, 2019 Applicability of Federal Arbitration Act, Federal Arbitration Act Section 1, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Statutory Interpretation and Construction, United States Court of Appeals for the First Circuit, United States Supreme Court Comments Off on New Prime v. Oliveira Part II: Federal Arbitration Act Section One “Contracts of Employment” Exemption Includes Independent Contractors
Contracts of Employment 1
Federal Arbitration Act Section 1

Section 1 of the Federal Arbitration Act (the “FAA”) exempts from the FAA’s scope disputes involving “contracts of employment of . . . workers engaged in . . . interstate commerce.”  9 U. S. C. § 1. Does the FAA apply to an agreement to arbitrate disputes between an individual trucker and an interstate trucking company if the contract between them establishes an independent contractor relationship, not an employer-employee one?

In New Prime Inc. v. Oliveira, 586 ___ U.S. ___, slip op. (Jan. 15, 2019), the United States Supreme Court said that the FAA does not apply to such contracts. That was so, the Court explained, because in 1925, the year Congress enacted the FAA, the term “contracts of employment” was ordinarily understood to include not only contracts establishing an employer-employee (or master and servant) relationship, but also independent contractor relationships. Slip op. at 7. Consequently, a court does not have authority under the FAA to stay litigation under FAA Section 3—or to compel arbitration under FAA Section 4—if the parties’ agreement evidences such a “contract of employment,” including a contract of employment that establishes an independent contractor relationship rather than an employer-employee one. Slip op. at 6, 7 & 15.

In our first New Prime post, here, we focused our discussion on a threshold issue addressed by the Court: who gets to decide whether a contract falls within Section 1’s “contracts of employment” exemption when the parties have delegated arbitrability disputes to the arbitrators? The answer to that question, we explained, is “the courts.” For the inapplicability of the Section 1 exemption is an “antecedent” question that must be resolved before the Court can conclude that it has any power whatsoever to stay litigation under Section 1 or compel arbitration under Section 4. Slip op. at 3-4. (See, also, here.)

Today we shift our focus to the merits of the Section 1 exemption question that the U.S. Supreme Court proceeded to resolve.

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