In the News: Arbitration or Class Action - For Transportation Lawsuits, the Difference Can be Staggering

In an article for the March 2019 issue of American Trucker Magazine, Steven Katz and Natalie Torbati Meinhardt shared insight on the use of arbitration agreements with class action waivers to mitigate risk by employers and the U.S. Supreme Court decision that originally upheld the practice.

The SCOTUS decision left the transportation industry unsure of its standing in arbitration matters and whether the SCOTUS decision would hinder them from the same benefits of arbitration as other industries. According to a more recent ruling in New Prime, Inc. v. Oliveira, the transportation industry has nothing to fear on that front.

Steve and Natalie unpack the new decision and what it means for the industry as follows:

• Getting up to speed. The Federal Arbitration Act (FAA) sought to counteract judicial hostility to arbitration, the attorneys share, but since then, employers have tried to use arbitration agreements to assuage the impact of class actions by vying for rules to make arbitration work on an individual basis, rather than the class action route, drastically limiting the financial and judicial consequences typical of a class action suit.
• Deciphering the impact. In cases where the FAA does not apply, states can opt to limit the enforcement of arbitration agreements, effectively undercutting the agreements’ abilities to protect the transportation industry. Though there are exceptions, like the “transportation workers exclusion,” which states the FAA does not apply to “contracts of employment of seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce,” it has been unclear if independent owner-operators are subject to them.
• Developments and what’s to come. The New Prime, Inc. v. Oliveira decision clarified that independent owner-operators are subject to the regulations under the FAA, despite the law mentioning only “contracts of employment.”

“Transport employers are no longer left in limbo regarding how much the FAA’s policy of enforcing arbitration agreement applies to them,” Katz and Meinhardt said. “However, the Supreme Court’s decision resolves only questions to federal law. State courts will need to separately determine the enforceability of arbitration agreements involving transportation workers under state law.”

To view the full article, please click here and visit page 22 of American Trucker Magazine.