Millions of transportation workers who engage in interstate commerce now have the right to take their employers to court and to participate in class-action lawsuits, thanks to a unanimous Supreme Court decision in January. The result could have implications for Uber drivers and other gig-economy workers, too.
The case, New Prime v. Oliveira, pitted long-haul driver Dominic Oliveira against trucking company New Prime. After completing 40,000 training miles, Oliveira became a driver, but was classified as an independent contractor rather than a full-time employee. That distinction is important because in the trucking industry the title of “contractor” typically obligates drivers to do things like lease their own trucks and pay for their own gas.
“Because they’re responsible for all these costs, when you deduct them, these drivers may not make any money in a week—which is fine if they are actually independent,” says Penn researcher Steve Viscelli, who has studied the trucking industry for a decade and wrote a brief for the Supreme Court case. “But if they’re misclassified, if they really should be an employee, they’re entitled to minimum wage.”
Oliveira felt New Prime had intentionally misclassified him in order to pay him less, so he filed a class-action lawsuit. However, because he had signed a contract containing a forced-arbitration clause, he had no right to bring New Prime to court. Instead, the parties would have to go before an arbitrator.
“Arbitrators basically act like judges but often with more informal procedures,” says Penn Law professor Tobias Barrington Wolff. “In theory, arbitration can be easier and cheaper than a court battle; in practice, arbitration clauses often result in people getting no recovery at all.” That’s because these clauses often include language prohibiting a class-action lawsuit like the one Oliveira wanted to bring, and class actions frequently provide the only practical mechanism for individuals to receive compensation.
The Federal Arbitration Act (FAA) “requires that arbitration clauses be enforced most of the time, even if state law would declare them unenforceable, Wolff explains. “In practical terms, this has meant that most arbitration clauses get enforced. But the FAA has an exception for ‘contracts of employment’ for certain transportation workers.”
New Prime had argued that its truck drivers were independent contractors and therefore didn’t have a “contract of employment” with the company. But the January decision the Supreme Court rejected said that drivers like Oliveira fell under the FAA’s exception. In other words, notes Wolff, “New Prime could no longer use the statute to force arbitration.”
It was a victory for Oliveira, but it’s also a positive step for drivers in companies like Uber and Amazon. “All of the gig workers who are crossing state lines, even from Philadelphia to Camden, can no longer be forced into individual arbitration, which means they can join class-action suits,” Viscelli says. “It’s only a carveout for transportation workers, but it’s a big change for that sector of the gig economy.”
That sector happens to be growing at an amazing clip, says Gad Allon, a professor in the Wharton School. According to Allon, who has studied workers in the gig economy, in the past four years alone the portion of U.S. workforce participation there has increased by a factor of 10, with about 1 percent of people working in the gig economy regularly—an increase from just 0.1 percent. “In 2015, 44 million U.S. adults engaged in gig work, representing 34 percent of the entire workforce,” he adds. “Currently, they are viewed as independent contractors, in which case they have very little legal protection.”
Viscelli thinks the next fight—one that could potentially last for the next decade—will be in deciding whether gig-economy workers are employees, independent contractors, or another as-yet-undescribed class. The courts have already seen a number of lawsuits surrounding such workers’ minimum wage.
“In the trucking case, it’s obscene what’s happening to these workers, but it’s fairly clear,” Viscelli says. “For the stuff that’s less clear, like with workers in the gig economy, there’s likely going to be new law and potentially lots of legislation.”
Steve Viscelli is a Robert and Penny Fox Family Pavilion Scholar senior fellow, a senior fellow at the Kleinman Center for Energy Policy, and a lecturer in the Department of Sociology in the School of Arts and Sciences at the University of Pennsylvania.
Gad Allon is the Jeffrey A. Keswin Professor; a professor of operations, information, and decisions; and director of the Jerome Fisher Program in Management & Technology at the Wharton School at the University of Pennsylvania.