The case presented two issues to the court: 1) whether a court must determine the applicability of the FAA to the case when asked to compel arbitration, where parties delegated questions of arbitrability to the arbitrator; and 2) whether the FAA’s transportation worker exemption applies to independent contractors. The court answered both questions in the affirmative.
Oliveira, a truck driver, participated in an apprenticeship program established by New Prime (“Prime”), a trucking company. Upon completion of the program, Prime told Oliveira that he would make more money as an independent contractor than as a company driver. Thereafter, Oliveira signed an independent contractor operating agreement with Prime. Oliveira brought suit against Prime for violation of the Fair Labor Standards Act (FLSA). He claimed that the FAA transportation worker exemption covers his contract, and Prime moved to compel arbitration under the FAA arguing that applicability of the FAA exemption is a question the parties had delegated to the arbitrator. The district court held that the applicability question was for the court and that the section 1 exemption does not apply to independent contractors. Prime appealed.
On the first issue, Prime relied on the Eighth Circuit’s holding that “application of the FAA’s transportation worker exemption is a threshold question of arbitrability” which the parties delegated to an arbitrator. However, the court found the Eighth Circuit’s characterization of the issue as “a question arbitrability” a flawed premise. In doing so, the court borrowed the reasoning of a Ninth Circuit case and explained that for a district court to compel arbitration, the FAA must first apply to the case and confer on a district court the authority to compel arbitration. Following this reasoning, the First Circuit held that the question of the court’s authority to act under the FAA is an antecedent determination for the district court before it can compel arbitration.
On the second issue, Prime argued that the exemption does not apply to independent contractors, citing numerous district court decisions. The First Circuit disagreed, noting that statutory interpretation is not simply a “numbers game.” The court explained that the ordinary meaning of “contracts of employment” is simply “agreements to do work,” which encompasses works of independent contractors and that such interpretation is consistent with Congress’s concern with transportation workers and their necessary role in the free flow of goods at the time Congress enacted the FAA. As such, the court affirmed denial of Prime’s motion to compel arbitration. , Case No. 15-2364 (1st Cir. May 12, 2017).