Argument analysis: Justices dubious about enforcing arbitration agreements for transportation workers

The argument this morning in New Prime Inc. v. Oliveira displayed something that probably hasnt been seen this century: a Supreme Court bench predominantly dubious about the enforceability of an arbitration agreement.

The issue in the case is a technical one, though it has considerable practical importance: whether the Federal Arbitration Acts requirement that courts enforce arbitration agreements applies to independent contractors working in transportation industries (think truckers, workers on planes and boats, etc.). The Federal Arbitration Act has an exemption for the contracts of employment of those workers. Workers who have those exempt contracts are much more likely to avoid arbitration (and retain their right to challenge their conditions of employment in a court) than workers in other industries. The specific question before the Supreme Court is whether the exempt contracts of employment are limited to employer/employee relationships or whether they also include contracts with independent contractors. This matters because so many transportation workers operate as independent contractors rather than employees.

The basic strategy of Theodore Boutrous (representing the shipping company New Prime) was to argue that contracts of employment are limited to contracts with employees; contracts with an independent contractor are simply not employment contracts under the exemption. That strategy ran into stiff opposition from the earliest moments of the argument, as Justice Sonia Sotomayor interrupted Boutrous to emphasize Congress choice to refer to workers rather than employees. As Sotomayor noted, the statute:

said it shall apply to any other class of workers, not employees. It used a much broader term. Were trying to decide what contract of employment means. And if it meant only employees, Congress naturally would have used the word any other class of employees, but instead it chose a much broader word, workers.

Things looked much worse for Boutrous when Chief Justice John Roberts promptly expressed his agreement with Sotomayor. Roberts noted how quickly Boutrous had tried to shift the discussion from contracts of employment to whether or not theres an employee/employer relationship. And simply because someone would be considered or not considered an employee doesnt necessarily answer the question of whether its a contract of employment. Turning as he so often does to his personal sense of ordinary speech patterns, Roberts suggested that [p]eople think naturally of employing an independent contractor, which for him, at least, suggests that the question for the court to resolve is not employee/employer. Its employment.

Things got even worse for Boutrous when Justice Neil Gorsuch chimed in to offer an appreciative take on the argument presented in the brief for Dominic Oliveira (the worker). Interested as always in theories of interpretation, Gorsuch asked Boutrous [w]hat do we do about the fact that your colleague on the other side has documented that back in 1925, which is when the statute was enacted [the law] didnt necessarily distinguish between independent contractors and employees with the same degree of care that the law has subsequently come to use. Notice Gorsuchs phrasing he didnt just say that Oliveira argues that the understanding of employees was different in 1925; Gorsuch indicated that he himself was persuaded that it was different because Oliveiras counsel (Jennifer Bennett) had documented that point to Gorsuchs satisfaction. Then, just to make sure that there was no doubt about where that left him, Gorsuch commented that I think youd agree that we have to interpret it as a reasonable reader would have at that time.

Of course, if the distinction between employee and independent contractor was less refined in 1925 than it is now, then the link that Boutrous posits between contracts of employment and employees has to be even weaker. To make his doubts about Boutrous position even clearer, Gorsuch went on to offer a gotcha moment, noting that even your own client doesnt use the distinction that Boutrous pressed. Specifically, Gorsuch (apparently relying directly on Bennetts brief) described the New Prime websites portrayal of the company as employing independent contractors.

From that point, the bench became relatively quiescent, with two topics dominating the remainder of the discussion. The first was what Justice Ruth Bader Ginsburg termed the gateway question whether the coverage of the federal statute should be determined first by the court or by the arbitrator. Boutrous had argued in his brief that the court should leave the arbitrability question to the arbitrator, but several justices found that argument wholly unpersuasive. Ginsburg, for example, asked, [I]f [the statute] puts an entire category outside the arbitration act entirely, then how can you use the arbitration act? Similarly, Gorsuch suggested that [b]efore a court can issue an order compelling arbitration, I would have thought it would have had to satisfy itself that it had the power to issue such an order. Even Roberts thought it would be quite another thing to say that the arbitrator gets to decide whether a court can compel arbitration at all. Faced with a bench so strongly opposed, Boutrous more or less conceded the point, agreeing that wed be happy to have the federal district court interpret the contract or this Court could do it.

For the most part, the justices allowed Bennett to argue without interruption. The principal topic they raised with her was how to handle the distinction between contracts with a company (like Federal Express), which would not be subject to the FAA, and contracts with an individual worker, which would be. Remarkably, she faced no substantial challenges to her central contention that contracts of employment include both employees and independent contractors.

There cant be much doubt about the outcome in a case like this one, involving a dispute between a business and its workers in which Roberts and Gorsuch seem so strongly predisposed to side with the worker. So, notwithstanding the long line of cases reading the Federal Arbitration Act broadly, this one has all the indications of a victory for the worker seeking a day in court. Indeed, it could be a candidate for one of the earliest decisions of the term.