By: R. Chauvin Kean

Generally, a contract is the law between parties, which has long been the position of the U.S. Supreme Court. However, as most well know, this principle is not without limitation. On January 15, 2019, in New Prime v. Oliveira, the Court unanimously held that disputes concerning contracts of employment involving transportation workers engaged in foreign or interstate commerce cannot be compelled to arbitrate. 586 U.S. —, 4, 2019 WL 189342, at * — (2019). Also, despite strong, express language in an agreement ordering the parties to arbitrate any of their disputes, a court – not the arbitrator – is the appropriate forum to review and decide the applicability of the Arbitration Act to any contract.

The Federal Arbitration Act declares that an express arbitration clause in a maritime transaction involving commerce shall be valid and enforceable provided the Act does not further limit its application. 9 U.S.C. §§ 1 – 2 (West 2019). However, §1 declares that “nothing contained [in this Act] shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1 (West 2019). Specifically, the Court in New Prime resolved a longstanding issue of whether a “contract of employment” concerned any type of contract for work (such as one involving independent contractors) or only those contracts between an employee – employer. The Supreme Court affirmed the First Circuit’s ruling that in 1925, at the time of the Act’s inception, “contract of employment” was not a term of art; it was a phrase used to describe “agreements to perform work” and was not limited to agreements only between employees and employers as a modern jurist might first think.

New Prime provides two important lessons: first, no contract provision – however ironclad – is immune from court oversight and interpretation. Parties to a contract may attempt to limit their litigation exposure, but cannot be immune from all possibilities, especially when they try to contract around statutes. New Prime is a great example of limited application of a broad federal statute, which, even though is favored by the courts, is limited by Congress. Second, New Prime provides greater clarity in the realm of contracts for work relating to transportation workers. Any “contract for employment” concerning workers engaged in foreign or interstate commerce cannot be contractually compelled into arbitrations regardless of contractual provisions that state otherwise. New Prime, 586 U.S. at 15. It’s also worth noting that the type of workers engaged in foreign or interstate commerce has vastly expanded over time as our society grows further connected. Thus, companies should be mindful that even though contracts of employment might attempt to limit litigation through arbitration provisions, a court may not be inclined to order the parties into arbitration based on New Prime and the employee’s/independent contractor’s scope of work.

By A. Edward Hardin, Jr.

America’s dad, America’s newscaster, and Louisiana’s Secretary of State all recently occupied headlines regarding allegations of sexual misconduct.  Last month, a Norristown, Pennsylvania jury found Bill Cosby guilty of three counts of sexual assault.  This was the same Bill Cosby who played the role of Dr. Cliff Huxtable on The Cosby Show in the 1980s and early 1990s, was formerly known as “America’s Dad,” and was named as the greatest television dad of all time.  That same week, former NBC News anchor Tom Brokaw was accused of making unwanted advances toward a former NBC correspondent.  Then, May kicked off with the announcement that Louisiana’s Secretary of State, Tom Schedler, had resigned amid allegations of sexual harassment by a former employee.  These recent headlines clearly demonstrate the need for effective policies and training at all levels on issues of sexual harassment and discrimination.  If employers ignore training opportunities and the chance to get ahead of the issues, you or your business may be in the next round of headlines.  Be proactive, it’s important.

For more on these recent headlines, see the following links: