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How 'New Prime v. Oliveira' Has Shocked the Transportation Industry

Back on January 15, 2019, the U.S. Supreme Court made yet another groundbreaking ruling on New Prime Inc. v. Oliveira, upholding the ruling of the United States Court of Appeals for the First Circuit by a unanimous 8-0 margin (Justice Kavanaugh did not participate in the case).

The Court ruled that owner/operators involved in interstate commerce have the right to have their employment claims heard by a court, as the drivers in question are viewed as transportation employees and therefore exempt from the Federal Arbitration Act. Furthermore, it was determined that the exceptions set forth in the FAA, principally for those involved in foreign and interstate commerce (such as truck drivers), do apply to contractors as they would to regular employees.

The case came to fruition after Dominic Oliveira sought employment with trucking company New Prime, Inc.. After approximately 40,000 miles driven at either no pay ("trainee") or very little pay, Oliveira chose to be a contractor rather than an employee (and was strongly encouraged to do so by the company). Since he was an independent contractor, New Prime was able to charge Oliveira (and other contractors) for leasing vehicles, in addition to fuel costs and equipment. It became so disadvantageous that Oliveira finally switched to an employee, but filed the suit shortly afterwards, arguing against the company's supposed mistreatment of contractors.

So what effects does this decision create? More lawsuits will surely be filed, and this places additional pressure on employers in the trucking industry.

Steve Bojan, writing for Risk & Insurance, suggests the following measures for fleet owners with independent contractors:

  • Have an experienced transportation law attorney craft your owner operator agreement. Remember this is a contract between business parties and should be treated as such. It is important to ensure that your agreement is in compliance with applicable state and federal laws/regulations. Your local counsel is knowledgeable about favorable state regulations and how to craft an agreement that is not easily challenged. 

  • Purchase employment practices liability insurance (EPLI). Talk to your insurance broker about EPLI, which provides fleet operators with protections against the potentially huge costs associated with independent contractor employment issues. In many cases, the policies will include a panel of suggested transportation labor attorneys who offer preferred rates and have a known track record.

  • Instruct your operations staff appropriately. Teach your staff the difference between working with employees and owner/operators. Practices such as forced dispatch, dictating routes and exerting other unnecessary protocols can have an adverse effect. Make sure your operations staff isn’t acting in a fashion that’s going to put your independent contractors’ status in question. It’s often about how much control your staff is exhibiting. Think of it as a plumber coming to your house to fix a sink and requiring the technician to use your tools and fix the problem according to your recommendations.

  • Build an attractive owner/operator program. Keep independent contractors happy so they do not want to be reclassified as company drivers. Make sure owner/operators are well compensated, have a healthy lifestyle and can become successful business people. Provide them with options that assist in protecting their livelihood such as occupational accident insurance that protects them if an injury occurs, physical damage insurance to repair their vehicle if it is involved in a crash and vehicle breakdown coverages to protect against major system breakdowns. Creating a voluntary benefits program that allows the owner operators to plan for their future and protect their family is a great opportunity to show how your organization is looking out for them as people, not just as a subcontractor.

Simple measures can ensure the prevention of devastating lawsuits, while ensuring equitable treatment for drivers under the law.

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