A court case between a trucker and his company went all the way to the Supreme Court recently. This January, a decision was finally made. The Supreme Court's ruling has important implications that anyone in the transportation industry should be aware of.
Dominic Oliveira brought a class-action suit against interstate trucking company New Prime Inc., arguing that they violated the Fair Labor Standards Act and failed to pay drivers minimum wage. New Prime countered by filing a motion to require arbitration, arguing that the Federal Arbitration Act (FAA) applied and Oliveira's employment agreement included arbitration. The Federal Arbitration Act provides for contractually based compulsory and binding arbitration, and the result is an arbitration award rather than a judgment.
Why does this even matter? Arbitration is private and involves a neutral third party acting as arbitrator whereas a judgement is public and involves a jury or judge. In an arbitration, attorneys have a smaller role, the arbitrator decides what evidence is allowed, there is no interrogation, and the parties give up the right to an appeal.
Oliveira then argued that New Prime cannot require arbitration because Section 1 of the FAA excludes workers involved in interstate commerce, which he was. New Prime claimed that Oliveira was not exempt from the FAA because he was an independent contractor and that they could require arbitration.
The Supreme Court unanimously ruled that independent contractors involved in interstate commerce have the right to have their employment claims heard by a court, and that all transportation workers (not just company employees) are exempt from the Federal Arbitration Act. They also ruled that the court, not an arbitrator, should determine whether a Section 1 exclusion to the FAA applies before arbitration can be enforced.
So what does this mean? Well, if you're an employee or independent contractor transporting goods interstate, it means that your right to your day in court is protected. You cannot be forced into arbitration, during which you will have no chance to appeal and the evidence you supply is limited. If your company believes you are exempt from Section 1 of the FAA for whatever reason, it is up to the court to decide if this is the case and not an arbitrator.
For transportation businesses, the implications of Prime vs. Oliveira are big. The Supreme Court ruled that there is no difference between an employee and an independent contractor in the transportation industry in regards to the FAA. We'll likely see more lawsuits, including class action suits. Companies that hire independent contractors can no longer require wage claims and employment disputes be arbitrated.
Now is the time to reduce risk and exposures for fleet operations.
Fleet owners should first and foremost sit down with their attorneys and review their employment contracts and practices. Those practices and policies should then be made clear to employees. Pay special attention to what workers are classified as. A misclassification of employees as independent contractors recently cost a Connecticut limo company $750,000 (see here).
Secondly, have your insurance shoulder the risk. Employment practices liability insurance (EPLI) protects businesses against claims that workers' legal rights have been violated. The right EPLI protects a business from all sorts of lawsuits, including discrimination, breach of contract, and wrongful termination. EPLI may be included as part of a Business Owners Policy or can be added on to an existing policy. EPLI may also be available as a stand alone policy.
Not to be underestimated is the importance of treating everyone well. If your employees, independent contractors, and staff are happy, they won't want to bring you to court. Ask yourself, do you have any procedures in place that risk angering independent contractors? Do your workers feel valued? Do they enjoy working with you? Listen to their complaints, seek their feedback, and make it so that they want to come and work for you.
The bottom line is that the likelihood of litigation just increased for transportation businesses while workers' rights were protected.
Lawsuits are expensive. If you've had any doubts about your risks and the safety of your transportation business, now is the time to get some answers. Contact our office with any questions you have about what your insurance does and does not cover. The right coverage can mean the difference between going out of business and remaining open for years to come.