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First Circuit thwarts trucking company’s attempt to push minimum wage lawsuit into arbitration

In an important decision for transportation workers, the U.S. First Circuit Court of Appeals has held that a trucking company cannot use the Federal Arbitration Act (FAA) to force its truckers to bring their claims against the company in arbitration. As we have previously discussed, companies often force workers to sign arbitration agreements because the arbitration system is stacked in those companies’ favor. When workers forced to sign one of these arbitration agreements file their claims in court, instead of in arbitration, companies often rely on the FAA to get the cases thrown out of court and into arbitration. But in this case, the First Circuit held that the FAA did not apply.

This case involved a class of truck drivers who sued New Prime, Inc. for minimum wage violations. New Prime allegedly engaged in a practice of encouraging truck drivers to become “independent contractors” instead of employees of the company. One of the issues in this case is whether the truck drivers were, actually, independent contractors or were employees. If they were employees, the federal Fair Labor Standards Act (FLSA) would entitle them to minimum wage; but if they were independent contractors, FLSA would not cover them.

The FAA does not apply in cases involving transportation workers and, thus, companies cannot use the FAA to force cases brought by transportation workers into arbitration. New Prime argued that the exemption for transportation workers only applies to cases involving employees and does not apply to cases involving independent contractors. New Prime also argued that an arbitrator, instead of a court, should decide whether the FAA applied to this case. The First Circuited rejected both of New Prime’s arguments.

The First Circuit first rejected New Prime’s argument that an arbitrator, instead of the court, must decide whether the FAA applies to the case. The court held that sending the case to an arbitrator under the FAA to determine whether the FAA applied to the case was putting the “cart before the horse.” New Prime was likely eager to have an arbitrator decide whether the FAA applied to the case because it believed an arbitrator would be more likely than a court to find that the FAA applied. This would make sense because if an arbitrator determined that the FAA did not apply, the case could be sent back to court and the arbitrator would not collect any further fees for presiding over the case. Thus, arbitrators have a built-in incentive to find that the FAA applies to the cases that come before them.

After determining that it was the proper authority to determine whether the FAA applied to the case, the First Circuit determined that the FAA did not apply. The court rejected New Prime’s argument that the FAA applied because the truck drivers who sued it were independent contractors. According to the court, whether a truck driver is classified as an independent contractor or an employee is irrelevant for purposes of determining whether the FAA applies to the case. The court held that the FAA does not apply to transportation workers; and that exemption for transportation workers extends to both employees and independent contractors.