Is Uber next? US Supreme Court case could be a game changer

New Prime v. Oliveira (US Supreme Ct 01/15/2019) [PDF] held that an interstate truck driver does not have to arbitrate his wage and hour claim – even though he signed an arbitration agreement.

This could have a big effect on lawsuits between Uber and their drivers. It probably turns on whether the drivers are IN interstate commerce.



Emailed click box did not suffice to show assent to employer's arbitration agreement.

We live in a digital age. What must an employer do to obtain digital agreement to its arbitration policy? Here is one case that gives one answer.

The New Jersey Appellate Division reversed the trial court's order compelling arbitration of a claim of religion discrimination. The court applied Leodori v. CIGNA Corp., 175 N.J. 293, 303 (2003) to find that there had not been an "explicit, affirmative agreement that unmistakably reflects the employee's assent." Skuse v. Pfizer (New Jersey Ct App 01/16/2018) [PDF].

The employer emailed to its workforce what it called a "training module" which described the company's mandatory arbitration policy. There was a link to the full text of the policy. In the module, employees simply were asked to "acknowledge" it with the click of an electronic button. The module declared that if an employee did not click the acknowledgement, but continued to work for the company for sixty or more days, the employee would be "deemed" to be bound by the arbitration policy.

The court held that the employee "never expressed in written or electronic form her explicit and unmistakable voluntary agreement to forego the court system and submit her discrimination claims against her former employer and its officials to binding arbitration." She clicked a box to indicate that she acknowledged receipt of the arbitration agreement, but nothing indicated she agreed to it. Compliance with the Leodori case requires that the click box contain the word "agree" or "agreement."

The court rejected the employer's argument that the employee was "deemed" to be bound by the arbitration policy because she continued to work for more than sixty days after receiving the arbitration agreement. "Such a proclamation of 'consent by default' is legally insufficient, however, to satisfy the requirements of explicit and unmistakable employee assent prescribed by Leodori."

SCOTUS: Interstate trucking independent contractors are exempt from the Federal Arbitration Act

Some pundits were surprised that the Court would issue a "pro-worker," "anti-arbitration" decision, failing to understand that the Justices all do their best to be faithful to the words Congress puts into its statutes.

Dominic Oliveira is an interstate truck driver whose contract with New Prime designates him as an independent contractor. The contract contains a mandatory arbitration provision and contains a "delegation clause," giving the arbitrator authority to decide threshold questions of arbitrability. Oliveira filed a class action claiming that New Prime failed to pay statutory minimum wage. The trial court denied New Prime's motion to compel arbitration; the 1st Circuit affirmed. The US Supreme Court affirmed unanimously. New Prime v. Oliveira (US Supreme Ct 01/15/2019) http://case.lawmemo.com/us/Oliveira.pdf

The Federal Arbitration Act (FAA) directs courts to compel arbitration, but §1 says that "nothing" in the Act "shall apply" to "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."

The Supreme Court held that the trial court – not the arbitrator – must first decide whether FAA §1 excludes Oliveira. This is because the contract's delegation clause (which is merely a specialized type of arbitration agreement) can be enforced only if the FAA applies in the first place.

The Supreme Court also held that FAA §1 excludes Oliveira. The FAA's term "contract of employment" refers to any agreement to perform work. At the time of the FAA's adoption in 1925, the phrase "contract of employment" was not a term of art, and dictionaries tended to treat "employment" more or less as a synonym for "work." Contemporaneous legal authorities provide no evidence that a "contract of employment" necessarily signaled a formal employer-employee relationship.

Justice Kavanaugh's 1st opinion: Arbitration

The US Supreme Court has held – unanimously – that courts must enforce an arbitration delegation clause even if the merits appear to be "wholly groundless." Henry Schein v. Archer & White (US Supreme Ct 01/08/2019) [PDF]. This is Justice Kavanaugh's first Supreme Court opinion. Eight pages.

[This is not an employment law case, yet it will have an impact on employment agreements that contain an arbitration clause.] Archer & White Sales sued Henry Schein alleging antitrust violations and seeking both money damages and injunctive relief. Schein moved to compel arbitration, citing an arbitration clause in the parties' contract. Archer & White argued that the dispute was not subject to arbitration because its complaint sought injunctive relief, at least in part, and the arbitration agreement had an exception for injunctive relief. Schein contended that because the rules governing the contract provide that arbitrators have the power to resolve arbitrability questions, an arbitrator – not the court – should decide whether the arbitration agreement applied. Lower courts held that the argument in favor of arbitration was "wholly groundless," and so the trial court could – and did – decide that the arbitration agreement did not cover this dispute. The US Supreme Court unanimously reversed.

The US Supreme Court held that the "wholly groundless" exception to arbitrability is inconsistent with the Federal Arbitration Act (FAA) and the Court's precedent. Under the FAA, arbitration is a matter of contract, and courts must enforce arbitration contracts according to their terms. The parties may agree to have an arbitrator decide not only the merits of a particular dispute, but also "gateway" questions of arbitrability. Therefore, when the parties' contract delegates the arbitrability question to an arbitrator, a court may not override the contract, even if the court thinks that the arbitrability claim is wholly groundless. "[A] court may not 'rule on the potential merits of the underlying' claim that is assigned by contract to an arbitrator, 'even if it appears to the court to be frivolous.'"