Check Your Arbitration Agreements: The Supreme Court Handed Workers A Big Win
In a unanimous opinion, with Justice Ginsburg concurring, the U.S. Supreme Court held that an exemption under the Federal Arbitration Act (“FAA”) applies to contracts with independent contractors. The FAA generally requires courts to enforce private arbitration agreements. But the FAA has exemptions, including “contracts of employment of . . . workers engaged in foreign or interstate commerce.”
Here, the plaintiff driver alleged that workers were not paid their lawful wages and brought a class action lawsuit against his employer, an interstate trucking company. The driver had entered into an operating agreement with his employer that classified him as an independent contractor and contained a mandatory arbitration clause. When the employer attempted to compel arbitration, the driver argued that he fell within the FAA exemption. Specifically, he argued that “contracts of employment” include independent contractors and not just employee-employer relationships. The Supreme Court agreed with the driver. As such, the employer was unable to compel arbitration, and the case may now proceed to trial. Employers should keep in mind that courts will not enforce arbitration agreements involving employment contracts with independent contractors who are engaged in interstate commerce.
For more information, the opinion is available here.