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Supreme Court: Interstate Transport Companies’ Independent Contractor-Drivers are Exempt from FAA

In New Prime, Inc. v. Oliveirathe U.S. Supreme Court held that the Federal Arbitration Act’s (FAA) Section 1 exemption applies to transportation workers, regardless of whether they are classified as independent contractors or employees. No. 17-340 (Jan. 15, 2019).

By its terms, the FAA does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. In a unanimous 8-0 decision (Justice Brett Kavanaugh did not participate), the Court held that:

  1. Whether the FAA’s Section 1 exemption applies to an arbitration agreement is a question for a court to decide first;
  2. The FAA’s Section 1 “contracts of employment” exemption covers independent contractors as well as employees.


New Prime is a trucking company. Dominic Oliveira was a New Prime truck driver who operated as an independent contractor and entered into an “Independent Contractor Operating Agreement” with New Prime. The agreement contained an arbitration provision, which stated that disputes between the parties, including disputes about “arbitrability,” would be resolved by arbitration. Subsequently, Oliveira filed a class action suit against New Prime in federal court for alleged violations of the Fair Labor Standards Act (FLSA) and Missouri minimum wage laws. Relying solely on the FAA, New Prime moved to compel arbitration. The district court denied the motion without prejudice to permit discovery on the issue of whether the FAA applied in this case. New Prime appealed, arguing that the district court was required to stay judicial proceedings while the parties proceed to arbitration.

On appeal, the U.S. Court of Appeals for the First Circuit held that before a court may compel arbitration pursuant to the FAA, it must determine whether the FAA applies. If the FAA does not apply, private contracting parties cannot, through the insertion of a delegation clause, confer authority upon a district court — i.e., to compel arbitration under the FAA — that Congress chose to withhold. Oliveira v. New Prime, Inc., 857 F.3d 7, 15 (1st Cir. 2017). After examining the text of the FAA’s Section 1 exemption and determining the FAA does not include a definition for “contracts of employment,” the First Circuit determined that when the FAA was enacted, “contracts of employment” meant agreements to perform work, including agreements with independent contractors. Because Oliveira’s “Independent Contractor Operating Agreement” is indisputably a transportation worker’s agreement to perform work, the First Circuit ruled that the agreement is exempt from the FAA and is unenforceable. New Prime appealed.

Supreme Court Decision

The Supreme Court affirmed the First Circuit ruling. Writing for the Court, Justice Neil Gorsuch stated that the sequencing of a statute is critical to understanding the meaning and scope of the statute. The Court first must determine whether the exemption in Section 1 of the FAA applies before it may consider exercising the power to compel arbitration set forth in the FAA’s Sections 3 and 4. Essentially, the Court held that if the FAA does not apply at all pursuant to Section 1, the Court does not reach the issue of delegation of arbitrability.

Turning its attention to the Section 1 exemption, the Court held that the phrase “contracts of employment of … workers engaged in … interstate commerce” covers independent contractors as well as employees. In reaching this conclusion, the Court determined that the plain language of the statute — i.e., the term “workers” — was broader than “employees.” The Court then examined numerous historical sources, dictionaries, treatises, and cases and concluded that in 1925 (when the FAA was adopted), the ordinary meaning and usage of the terms “workers” and “contracts of employment” extended to a wide variety of employment relationships, including what we now call independent contractors. Thus, the Court held, the plain language, the ordinary meaning, and the intent of the drafters all indicate that the Section 1 exemption applies here and support the First Circuit’s conclusion that courts lack the authority under the FAA to compel arbitration in this case.


While this ruling is limited to the interpretation of Section 1 and the exemption from the FAA, it serves as a reminder that even though recent Supreme Court decisions have favored enforcement of arbitration agreements, such agreements must be prepared thoughtfully.

Jackson Lewis P.C. © 2022National Law Review, Volume IX, Number 17

About this Author

Samia Kirmani, Jackson Lewis Law Firm, Unemployment Counseling Attorney

Samia M. Kirmani is a Principal in the Boston, Massachusetts, office of Jackson Lewis P.C. She concentrates her practice in employment counseling, training and litigation on behalf of management.

Ms. Kirmani provides practical legal advice to clients on various employment law issues, including discrimination, health and leave management, reductions in force, retaliation and whistleblower matters, individual separations, and employee relations issues. Ms. Kirmani also assists clients with policy creation, revision and...

Eric R. Magnus, Jackson Lewis, Wage and Hour Class Defense Lawyer, Employment Matters Attorney

Eric R. Magnus is a Shareholder in the Atlanta, Georgia, office of Jackson Lewis P.C. His practice is focused primarily on defending federal and state wage and hour class and collective actions in jurisdictions across the United States.

Mr. Magnus’ collective and class action practice focus primarily on “donning and doffing,” “off-the-clock” and misclassification wage and hour cases. Mr. Magnus has obtained summary judgment at the district and circuit court levels in Fair Labor Standards Act and state law cases across the...

David E Nagle, employment attorney, tort claims, Jackson Lewis Law Firm

David E. Nagle is a Principal in the Richmond, Virginia, office of Jackson Lewis P.C. He is frequently called upon to counsel and represent employers with respect to a wide range of issues arising in the workplace, including claims based on allegations of employment discrimination, wage payment disputes, wrongful discharge, breach of contract, and various other statutory, contract and tort claims.

Mr. Nagle has considerable experience in trial and appellate courts enforcing arbitration agreements, including his successful argument on behalf of the employer in...

Collin O'Connor Udell, Attorney, Jackson Lewis Law Firm, Supreme Court Litigation
Of Counsel

Collin O’Connor Udell is Of Counsel in the Hartford, Connecticut, office of Jackson Lewis P.C. Her practice focuses on United States Supreme Court litigation and on complex or novel issues arising in other federal appeals. She has taken a central role in 35 cases before the United States Supreme Court, some of which have been widely acknowledged as among the most important cases of the last few terms.

In addition to her Supreme Court experience, Ms. Udell has represented clients in a wide variety of cases in the federal courts of appeals, including matters...


Stephanie L. Goutos is an Associate in the Albany, New York, office of Jackson Lewis P.C. Her practice is focused on general employment litigation and class action and complex litigation.

Prior to joining Jackson Lewis, Ms. Goutos was the Senior Attorney to the New York State Deputy Commissioner of Higher Education at the Department of Education. Ms. Goutos led negotiations with New York State teacher unions, administrative unions, and district superintendents, as well as provided counsel on a wide variety of education law issues. She has...