Who decides arbitrability question? US Supreme Court will decide

The US Supreme Court has granted certiorari in  New Prime Inc. v. Oliveira (US S Ct cert granted 02/26/2018) [Briefs]. This case will resolve an important question that arises under many arbitration agreements – whether it is for the arbitrator or for the court to decide the threshold question of whether the case will go to arbitration. It's pretty clear that - when one is applying the Federal Arbitration Act, and the arbitration agreement delegates arbitrablility to an arbitrator - then it's all for the arbitrator to decide. But in this case there is an issue as to whether the FAA applies in the first place. So we have a bit of a cat chasing its tail.

Dominic Oliveira was a truck driver who sued claiming violations of federal and state minimum wage statutes. New Prime – citing an arbitration agreement that Oliveira had signed – moved to compel arbitration. Oliveira's response was that (1) his contract was not covered by the Federal Arbitration Act, and (2) the trial court (rather than an arbitrator) should resolve that threshold question. The district court sided with Oliveira, and so did the 1st Circuit. Oliveira v. New Prime, Inc. (1st Cir 05/12/2017) [PDF].

Arbitration

The contract between Oliveira and New Prime provided for arbitration of "any disputes arising out of or relating to the relationship created by the agreement, and any disputes as to the rights and obligations of the parties, including the arbitrability of disputes between the parties."

New Prime's position is that the arbitration agreement itself delegates the question of the FAA's application to the arbitrator, not to the court. However, the 1st Circuit decided that New Prime's argument "'puts the cart before the horse' and makes no sense." Instead, the issue is a "'distinct inquiry' of whether the district court has the authority to act under the FAA — specifically, the authority under § 4 to compel the parties to engage in arbitration." This, of course, would be a judicial question and not a question for the arbitrator.

FAA exemption

The Federal Arbitration Act does not apply to "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." So, if the driver has a "contract of employment," then the FAA does not apply to that contract. And if that contract has an arbitration agreement, then the FAA does not require that it be enforced.

Using FAA-era dictionaries [circa 1925], the 1st Circuit said that "contracts of employment" contained in FAA § 1 means simply "agreements to do work." The court said:

"[W]e hold that a transportation-worker agreement that establishes or purports to establish an independent-contractor relationship is a contract of employment under § 1. We emphasize that our holding is limited: It applies only when arbitration is sought under the FAA, and it has no impact on other avenues (such as state law) by which a party may compel arbitration."

Here's a video I did that discusses the independent contractor question: