The Supreme Court in New Prime v. Oliveria ruled a truck driver’s employment dispute – even that of an independent contractor – may not be ordered to arbitration under the Federal Arbitration Act. FAA § 1 exempts such contracts from the provisions of the Act. But can the parties agree in their arbitration provision to contract around Section 1? The Ninth Circuit says they may not. The story of its August 19th decision in Romero v. Watkins & Shepard Trucking and the Court’s reasoning are worth a look.
Alejandro Romero worked as a truck driver for Watkins from 1997 to 2019, making intrastate deliveries within California of goods that “had once crossed state lines,” facts essential to the Court’s conclusion that he was engaged in interstate commerce for purposes of FAA § 1. His employment contract contained an arbitration agreement calling for arbitration under the FAA and expressly contracting out of the application of Section 1’s exemption. That contract provision is at the center of the Court’s opinion.
In August 2019 Watkins announced it would cease operations and informed Romero and fellow workers that they would be laid off. Romero was terminated effective August 23, 2019. He filed a putative class action against Watkins in state court alleging violations of the California and federal WARN acts, for failing to give sufficient notice of the cessation of business. Watkins removed the case to federal court and moved to compel arbitration. Of interest here, Watkins argued that the exemption was inapplicable because Romero’s work was entirely intrastate.
The district court ruled that because Romero made intrastate deliveries of goods that had previously crossed state lines, he was engaged in interstate commerce, within the meaning of FAA § 1 exemption. The Ninth Circuit affirmed, citing its 2020 decision in Rittman v. Amazon and ruling that parties to an arbitration agreement may not “contract around the FAA’s transportation worker exemption.”
In the end, however, arbitration was ordered in a companion decision, because the arbitration agreement also invoked the law of Nevada in the event the federal act was held inapplicable. Nevada has no transportation-worker exemption similar to FAA § 1. The Ninth Circuit affirmed the district court’s order to compel arbitration under Nevada law.