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December 27, 2018 Practice Points

What Do You Call a Worker?

By Maretta Comfort Toedt

The proper classification of workers as employees versus independent contractors has been a controversial issue for years since independent contractors do not typically receive the same benefits, pay, or other protections as do employees. 

The Federal Arbitration Act (FAA) is viewed by the Supreme Court as reflecting a national policy favoring arbitration. Section 1 of the FAA exempts transportation workers from its coverage by providing that “nothing herein contained shall apply to contracts of employment of seamen, railroad employees or any other class of workers engaged in interstate commerce.” The Court, however, has interpreted Section 1 narrowly, upholding mandatory-arbitration agreements covering work-related disputes that did not involve seamen, railroad employees, and other transportation workers. Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001).

This term, the Supreme Court will have an opportunity to decide whether independent contractors meet the legal definition of employee and thus are exempted from the FAA. New Prime, Inc. v. Oliveira, 138 S. Ct. 1164 (2018) (granting certiorari of the U.S. Court of Appeals for the First Circuit in Oliveira v. New Prime, Inc., 857 F.3d 7 (1st Cir. 2017).

Drexel University law professor Richard Frankel’s article in the Cardoza Law Review discusses the possible ramifications should the Court decide that independent contractors are not employees. Frankel warns that such a decision could incentivize employers to misclassify their workers as independent contractors.  

Maretta Comfort Toedt is a labor arbitrator in the Houston, Texas area.

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