New Prime Inc. v. Oliveira

Whether the Federal Arbitration Act’s (FAA) Section 1 exemption for transportation workers applies to contract workers, and whether the arbitrability of the Section 1 exemption is itself subject to arbitration through a valid delegation clause within the employment contract.

The Federal Arbitration Act’s Section 1 exemption provides that the FAA does not apply to the employment contract of “any class of worker engaged in foreign or interstate commerce.” Petitioner sought judicial enforcement of an arbitration clause within Respondent’s contract after Respondent claimed exemption from the FAA under Section 1. The district court denied enforcement on the grounds that the application of a Section 1 exemption is a threshold question which must be resolved by the courts, not a threshold question for the arbitrator. The First Circuit Court of Appeals affirmed. A circuit split exists on whether a valid delegation clause may require that a threshold question of arbitrability be decided by an arbitrator. Petitioner asserts that the Section 1 exemption, literally read, applies only to “contracts of employment” – that is, direct employer and employee relationships, not those relationships with independent contractors. Petitioner argues that the application of the Section 1 exemption is subject only to a determination of whether the contract between the parties creates an employee and employer relationship or a contract for work with an independent contractor. The First Circuit’s interpretation of independent contractors as within the class of workers exempted from the FAA under Section 1 created a circuit spilt requiring the Supreme Court’s resolution.