Supreme Court Affirms First Circuit in Federal Arbitration Case Contracts of Employment Broadly Construed Affects Seaman and Others Engaged in Foreign and Interstate Commerce

New Prime Inc. v. Oliveira, 2019 WL 189342 (no Lexis citation available) (Jan. 15, 2019)

Today the Supreme Court issued its decision in New Prime Inc. V. Oliveira. Justice Gorsuch wrote for the court (Kavanaigh took no part in the decision). Justice Ginsburg wrote a concurring opinion.

The respondent was classified as an independent contractor by the petitioner; the contract contained an arbitration clause. In a class action suit for wages, the petitioner moved the court to refer the entire matter to arbitration. The trial court and court of appeals denied the motion. The parties agreed that the work involved interstate commerce. Sec. 1 of the FAA excludes "contracts of employment of...workers engaged in foreign or interstate commerce."  (9 U.S.C. § 1) The court affirmed the First Circuit's decision that the court must decide for itself whether the contract falls within the exclusion before ordering arbitration.

The second issue involved the meaning of the term "contracts of employment."  It again affirmed the First Circuit and held that "contracts of employment" are agreements to perform work. It is not restricted solely to the employer-employee relationship. The contract thus fell within the purview of the exclusion of the FAA. The court lacked authority to compel arbitration.

The decision may have further implications in maritime employment contracts as § 1 excludes from the application of the FAA also “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Another issue is whether this decision will apply to seamen and other workers who fall within the exclusion and are borrowed employees.

A more detailed review of the decision will be posted soon.