Wilson Elser Alert: U.S. Supreme Court rules in favor of independent contractors

On Tuesday, the United States Supreme Court issued a blockbuster holding, ruling in favor of independent contractors who work in transportation.

Facts

In New Prime Inc. v. Oliveira, the Court was faced with an issue involving a dispute between the trucking company New Prime Inc., and one of its drivers, Dominic Oliveira. The parties’ contract labeled Oliveira as an independent contractor rather than an employee, and further, it instructed that any dispute arising out of the parties’ relationship should be resolved by an arbitrator—even disputes over the scope of the arbitrator’s authority.

Oliveira filed a class action lawsuit on behalf of himself and thousands of other contractors. He alleged that New Prime misclassified him as a contractor to underpay him in violation of a federal labor law. In response to Oliveira’s complaint, New Prime asserted that, under the Federal Arbitration Act (FAA), the court must compel arbitration according to the terms found in the parties’ agreements. The District Court for the District of Massachusetts and Court Of Appeals for the First Circuit agreed with Mr. Oliveira.

Supreme Court Decision

On appeal, the U.S. Supreme Court examined two issues: (1) whether the application of the exemption in § 1 of the FAA is an issue for courts or an arbitrator to decide, even if parties have agreed that issues of “arbitrability” are to be decided by an arbitrator; and (2) whether the “contracts of employment” language in § 1 of the FAA applies to agreements only involving employees, or whether it extends to transportation workers classified as independent contractors.

On the first issue, the Court affirmed the First Circuit’s ruling. The Court reasoned that, “while a court’s authority under the [FAA] to compel arbitration may be considerable … it is not unconditional.” One condition is established in § 1, which provides that nothing in the FAA shall apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” It held that a court should decide for itself whether § 1’s “contract of employment” exclusion applies before ordering arbitration. The Court reasoned this is the procedure even when parties’ agreement delegates to an arbitrator to decide whether the parties’ dispute is subject to arbitration because a delegation clause is “merely a specialized type of arbitration agreement” and can be enforced “only if the contract in which the clause appears does not trigger § 1’s ‘contract of employment’ exception.”

On the second issue, the Court interpreted the “contracts of employment” to refer broadly to any agreement to perform work and is not limited to employee-employer relationships. The Court relied on the ordinary meaning of “contract of employment” when Congress enacted the FAA in 1925. At the time of enactment of the statute, “employment” was more or less a synonym for “work,” and as a result, “most people then would have understood § 1 to exclude not only agreements between employers and employees, but also agreements that require independent contractors to perform work.” There was no dispute that Oliveira, as an owner-operator for New Prime, qualified as a “worker engaged in … interstate commerce.” Therefore, the Court rejected New Prime’s claim for arbitration, and held that “contracts of employment” covers even independent contractors.

Take Away

The Court’s decision has broad implications for an industry that relies on the independent contractor/owner operator model. While this ruling is limited to § 1 of the FAA, it serves as a reminder that arbitration agreements must be prepared thoroughly and thoughtfully in order to be utilized effectively.

For further information on transportation or employment issues, please contact MTAC partners, Attorney Brian Del Gatto at (203) 388-2400 or Attorney Joseph Baiocco at (203) 388-2403 of Wilson Elser’s Transportation Law practice. Additional information can be found at the Wilson Elser website.

Joe Sculley interview on The Talk of Connecticut

MTAC President Joe Sculley was a guest on the Talk of Connecticut radio show with Brad Davis and Paul Pacelli on Wednesday, Jan. 16. The interview was held to discuss the taxes and fees paid by the trucking industry, as well as trucking’s critical role in the state’s economy, which was briefly outlined in this Yankee Institute article.

An archived version of the interview is available on the Talk of Connecticut website.

 

Connecticut Resources

Major policies opposed by businesses loom in Democrat-controlled legislature

From Hartford Business Journal.

With what’s been deemed a regressive tax system, wide income disparities and an eroding middle class, Connecticut is an increasingly tough place for a common person to build wealth and climb society’s slippery mobility ladder, according to state Rep. Joshua Elliott.

Those challenges, which aren’t unique to Connecticut, are part of what drives the Hamden Democrat, who hopes to chip away at them this legislative session by pushing his party as far to the political left as possible.

“We’ve come into this paradigm where people confuse how the stock market does and how good our GDP is with how well the economy is doing,” Elliott, 34, said in a recent interview at Season & Thyme, a Hamden health and food market he manages. “We hear news about how good things are, but in our pocketbook, we still feel it’s tighter than it’s ever been.”

The law school graduate and co-owner of a second, similar market in Shelton was reelected to a second term in November. He drew his fair share of headlines for a freshman legislator, openly discussing his own after-hours marijuana use, and jousting with business interests, Republicans, and even fellow Democrats he deemed not sufficiently on board with what he views as non-negotiable pieces of the party platform.

That includes support for a $15 minimum wage (or higher, if possible) and creating a paid family medical leave program for private employees, actions that could impact the bottom line of his and other businesses, which is why employer lobbying groups have fought both policies in recent years.

See complete article from Hartford Business Journal online.

Oil gains as US stockpiles seen falling, China plans tax cuts

From Transport Topics.

Oil rose amid estimates of another decline in U.S. crude inventories and signs that China is stepping up efforts to combat an economic slowdown.

Futures in New York climbed as much as 3% after sinking during the past two sessions. American stockpiles probably fell for the sixth time in seven weeks, according to a Bloomberg survey of analysts before government data due Jan. 16. Equities closed higher in Asia after senior Chinese officials promised tax cuts to boost growth. Crude also extended gains as forces allied with Libya’s eastern leader moved to secure oil-producing infrastructure.

“Essentially we have gone from pricing a recession back to a more moderate outlook within the span of just six weeks,” analysts at JBC Energy GmbH in Vienna said.

While oil is resuming an advance that took it into a bull market last week, it’s still more than 30% below October’s four-year high. China’s weakest trade data since 2016 have stoked concerns over the impact of an ongoing trade war with the U.S. But senior policy officials said this week that China will cut taxes “on a larger scale” to help support its slowing economy.

See the complete article from Transport Topics online.

Connecticut’s toll-wary truckers tally their economic benefits

From the Hartford Business Journal.

Connecticut’s trucking industry delivers some $3.2 billion in pay to its workers annually, and that’s just the tip of the iceberg in calculating the sector’s financial and other contributions to the communities it serves, fresh data shows.

Connecticut’s 58,400 trucking jobs annually earn an average of $54,350 per worker, says the American Transportation Research Institute (ATRI). Based in Arlington, Va., ATRI jointly released its data Thursday via the Motor Transport Association of Connecticut (MTAC) in Hartford.

“These numbers prove once again what the hard-working men and women in the industry already know; the trucking industry provides good-paying jobs and great career opportunities,” MTAC President Joe Sculley said in a statement.

“Our employees also know that the trucking industry is the backbone of the economy,” he said.

The ATRI data comes amid growing concerns among Connecticut’s truckers about the potential for state lawmakers in the upcoming legislative session to seriously weigh tolling state highways to fund road maintenance and other transportation infrastructure.

See the complete article from the Hartford Business Journal online.

Truckers say they already pay fair share for Connecticut roads

From the Yankee Institute.

Governor-elect Ned Lamont has reiterated his call to toll trucks as a way to raise revenue for state transportation costs, but truckers and trucking companies are already paying for Connecticut roads, according to data released by the American Transportation Research Institute.

A fact sheet released by ATRI notes the trucking industry paid 32 percent of all state taxes owed by motorists, while only accounting for 5 percent of the miles traveled in Connecticut.

The typical tractor trailer paid $8,610 in state fees and taxes and an additional $8,906 to the federal government in fees and taxes.

President of the Motor Transport Association of Connecticut Joseph Sculley said the state of Connecticut takes in between $25 and $30 million per year from out-of-state trucks through the state’s participation in the International Fuel Tax Agreement and the International Registration Plan.

See the complete article from the Yankee Institute online.

MTAC Announces Partnership with Wilson Elser Law Firm

MTAC is pleased to announce a new partnership with national law firm Wilson, Elser, Moskowitz, Edelman, & Dicker LLP. The firm, better known as Wilson Elser, is more than 800 attorneys strong. They serve clients of all sizes, across multiple industries and around the world. Wilson Elser has 37 strategically located offices in the United States and another in London. This depth and scale has made Wilson Elser one of the nation’s most influential law firms, ranked in the Am Law 200 and top 53 in the National Law Journal 500.

Wilson Elser is a law firm that specializes in transportation, among other industries. With offices in Hartford and Stamford, Connecticut, they offer ready access to virtually any legal service, drawing on the collective experience resident among their own attorneys and colleagues throughout the broader firm. Wilson Elser has worked with several MTAC members over the past few years.

Wilson Elser is ready to serve their trucking industry clients in any number of areas, including but not limited to:

  • Contesting fines issued during a roadside inspection
  • Crafting motor carrier − independent contractor agreements
  • Establishing procedures  to help ensure that pre-trip and post-trip inspections are completed and documented properly
  • Dealing with all aspects of a shipper/broker/carrier relationship
  • Defending civil and/or criminal litigation.

As part of this partnership, Wilson Elser will send periodic newsletters to MTAC members and conduct seminars focused on legal issues in the trucking industry. These valuable adjuncts are intended to help members and prospective members stay up to speed on the many legal issues impacting the transportation industry in Connecticut and beyond.

Contact Wilson Elser attorneys directly:

  • Brian Del Gatto: (203) 388-2400
  • Joseph Baiocco: (203) 388-2403
  • Stephen P. Brown: (203) 388-2450

UCR fees dip again in 2019, registration open until April 1

From Overdrive Online

Unified Carrier Registration fees for trucking companies, brokers and freight forwarders for 2019 have been reduced from 2018 levels so as not to exceed the statutory maximum set by Congress. Fees will climb in 2020 from 2019, but still stay below levels from 2010-2018.

For carriers with one or two trucks, the 2019 fee will be $62. In 2020, that fee will climb to $68.

The new fees went into effect Dec. 28. Registration for 2019 is available at www.ucr.gov, and it must be completed by April 1.

Fees graduate higher for carriers with more trucks.

Carriers with between three and five trucks will pay $185; those with six to 20 trucks will pay $368; fleets with 21-100 trucks will pay $1,283; while trucking companies with between 101 and 1,000 trucks will pay $6,112 in 2019. Carriers with more than 1,000 trucks will pay $59,689 this year and $66,072 next year.

In 2020, fees will increase from 2019’s level but stay below levels from 2010-2018. Here are the fees for the next two years, compared to previous fees:

Click here to see the rates and the complete article from Overdrive Online.

MTAC to film video on tolls

MTAC is producing a video about the negative impacts of tolls on the Connecticut trucking industry. Since many members are not able to take an entire day off of the job on short notice to come to the Capitol, MTAC believes producing a video will help spread our message.

We need your involvement in order to make an effective video. Filming is scheduled to begin on Thursday, Jan. 31 at 10 a.m. at the MTAC office building. Register through the MTAC website to let us know that you will be coming.

MTAC seeks participation from any and all of the following: business owners, CEOs, CFOs, controllers, independent contractors, drivers, and operations managers, to name a few.

Come to the MTAC building on Jan. 31 prepared to talk about what your business does, and how Connecticut tolls would impact your business.

As a reminder, tolling proposals that have been on the table during the last couple of years call for tolling current highway capacity, which you have already paid for with fuel taxes, registration fees, etc. For your information, below are some suggested toll rates (on a per-mile basis) from a study released in November 2018 by Connecticut DOT consultant CDM Smith.

Fleet Screen background check service

Motor Transport Association of Connecticut (MTAC) and Fleet Screen have developed a proprietary background check service for MTAC members to assist them with their driver screening needs.

Criminal Background Checks and Motor Vehicle Records (MVR’s) are essential screening tools for motor carriers to ensure that their prospective drivers meet the safety criteria established by the industry and company policy.

All reports are FCRA (Fair Credit Reporting Act) compliant and are reviewed by Fleet Screen prior to reporting to your company.

Screening Packages are as follows:

Driver Bundled Package, $47 each, includes:

  • Social Security Verification
  • CDLIS Report
  • Connecticut Driving Records (MVR’s)
  • National Criminal Database
  • One County Criminal Report

Connecticut Criminal Record Check, $32 each, includes:

  • National Criminal Database
  • Connecticut Driving Records (MVR’s)
  • One DOT Employment Verification (all additional employers $15 each)

The above options are just a sample of what is available. Click here to see a document detailing all of what Fleet Screen has to offer.

Contact

Ben Johnson at Fleet Screen at (817) 332-0044 x702, or benj@fleetscreen.com and mention that you are a MTAC member.

NOTE: Connecticut’s “Ban the Box” law prohibits the inclusion of a question about criminal history on the initial employment application, unless the employer is required to do so by an applicable state or federal law. However, employers may still inquire into applicants’ criminal histories, but such background inquiries must occur AFTER an employment application has been completed, e.g., during an interview.