Supreme Court Resolves Circuit Split Regarding FAA’s Section 1 Exemption

Despite a delegation clause in the American Arbitration Association (AAA) rules, the Supreme Court held, in a unanimous decision, that a court must rule on whether a contract of employment is subject to the exclusion in section 1 of the Federal Arbitration Act (FAA). New Prime Inc. v. Oliveira, No. 17-340 (Jan. 15, 2019). Section 1 exempts transportation “workers” who engage in interstate commerce. In reaching its decision to not enforce the arbitration agreement, the Court found that independent contractors are “workers” and thus fall within the scope of the exclusion.