First Circuit Thwarts Trucking Company’s Efforts To Force Workers into Arbitration

First Circuit Thwarts Trucking Company’s Efforts To Force Workers into Arbitration

by Jennifer Bennett
Staff Attorney

It’s a clever scheme: Pretend your workers are independent contractors rather than employees, so you can skirt labor laws and avoid pesky requirements like, say, the minimum wage.  And then protect yourself from liability—after all, misclassifying employees as independent contractors is illegal—by requiring anyone who works for you to sign an arbitration contract, giving up their right to sue you in court.

Photo by Ed Dunens, via Flickr

At many companies, this scheme has become standard practice. And it’s particularly common in the trucking industry—an industry that employs millions.

But trucking companies shouldn’t be able to use this scheme. The Federal Arbitration Act—the law the companies depend on to enforce the arbitration contracts they force their workers to sign—explicitly exempts the “contracts of employment” of transportation workers.  That’s no problem, the trucking companies have been arguing.  Our drivers, they say, are independent contractors, not employees, and therefore their contracts can’t possibly be “contracts of employment.”  And, for a while, some trial courts bought it.

But now the jig is up.  This morning, the First Circuit Court of Appeals—the first appellate court to decide the issue—made clear that transportation companies cannot force their workers to arbitrate when they would not otherwise have to, simply by (mis)classifying them as independent contractors.  (Here’s the opinion.)

As the First Circuit explained, when the Federal Arbitration Act was passed in 1925, the term “contracts of employment” was universally understood to apply to all agreements to do work—regardless of whether the worker was an employee or an independent contractor.   (In fact, that’s still the most common meaning of the term today.)  And Congress used that broad term with good reason: The Federal Arbitration Act was passed at a time of tremendous strife within the transportation industry—disputes between transportation workers and their employers had repeatedly disrupted interstate commerce and, sometimes, even resulted in violence.  Congress exempted transportation workers from the Arbitration Act to ensure a public resolution of—and public authority over—these disputes that threatened the economic security—and, in some cases, the physical safety—of the nation.

The trucking company in this appeal argued that the text of the statute doesn’t really matter that much, because arbitration is different.  In arbitration-land, the company argued, the policy in favor of arbitration means that courts must enforce arbitration clauses, regardless of what the law actually says.   But the fundamental principle of statutory interpretation is that laws are interpreted based on what the words Congress used meant at the time Congress used them.  The First Circuit made clear that the Federal Arbitration Act is no exception.  Even in arbitration-land, words still matter—and the law is still supreme.

Perhaps seeing the writing on the wall, the trucking company tried to get the First Circuit to agree not to decide the issue at all.  It argued that the court should require the drivers to arbitrate the issue of whether the Federal Arbitration Act applies in the first place.  As the First Circuit recognized, that makes no sense.  The court’s power to compel arbitration comes from the Federal Arbitration Act. If the Federal Arbitration Act did not apply, there would be no basis for the court to compel arbitration—of any question, including the question whether the Federal Arbitration Act applied.

This decision is a huge win for transportation workers—and for the fight against forced arbitration.  For the millions who work in the transportation industry, the opinion puts the lie to the argument that transportation workers can be forced into arbitration simply because they are—or, worse, because their employer falsely claims they are—independent contractors.  And for anyone fighting forced arbitration, the decision makes clear that whether the Federal Arbitration Act applies in the first place is always a question for the court—not an arbitrator—to decide.

Photo by Ed Dunens, via Flickr