From JDSupra, Richard Reibstein discusses the exception to the Federal Arbitration Act (FAA) for workers engaged in interstate commerce and how companies can, aside from compelling arbitration under the FAA, compel arbitration under state law. Richard writes:
Companies can use two independent grounds to compel arbitration of independent contractor misclassification lawsuits: the Federal Arbitration Act (FAA) and state arbitration laws. The FAA, however, includes an exemption for workers engaged in interstate transportation. This exemption has consumed the attention of lawyers and courts for years, with numerous disputes over which types of workers are covered by the FAA’s arbitration exemption. Last month we reported in a blog post that the U.S. Supreme Court accepted a case addressing the application of that exemption to independent contractors who distribute food products to grocery and convenience stores for companies that manufacture the goods. The question presented to the Supreme Court is whether the FAA exemption applies to workers that are actively engaged in interstate transportation for companies that are not in the transportation industry. The Supreme Court typically grants review of cases only where they have outsized legal significance, but because lawsuits are also subject to arbitration under state law – regardless of whether the litigants are covered by or exempt from arbitration under federal law – there is little reason for the courts to continue to spend time and resources deciding if the FAA’s exemption applies. As reported below, this very issue was posed by a court last month when it stated that a state’s arbitration law may well have given it grounds to compel arbitration of an independent contractor misclassification dispute, even if the workers were covered by the FAA’s interstate transportation exemption. As we have noted repeatedly in several of our blog posts, an arbitration clause drafted in an effective manner as one part of an IC compliance program should provide sufficient grounds for a company to compel arbitration of misclassification disputes by independent contractors, even if the FAA’s interstate transportation exemption otherwise applies.