From JDSupra, Susan Lessack discusses the decision that UberBLACK drivers were independent contractors. The drivers operated their own transportation companies and their agreement with Uber said that the drivers were employees of the transportation comapny. Susan write:
On April 11, Judge Michael Baylson of the U.S. District Court for the Eastern District of Pennsylvania became the first judge to grant summary judgment on the issue of whether UberBLACK drivers are employees or independent contractors under the Fair Labor Standards Act (FLSA). Judge Baylson concluded that Uber correctly classified the plaintiffs — drivers who provided “black car” limousine services for Uber — as independent contractors. Razak v. Uber Techs., Inc., No. 16-573 (E.D. Pa. 2018). The plaintiffs intend to appeal. Although the analysis of independent contractor classification is fact-intensive and varies depending on the type of claim asserted by the plaintiffs, gig economy employers will find the Razak opinion helpful in structuring their independent contractor relationships.
The Razak complaint was brought by three limousine drivers (on behalf of themselves and a putative class of drivers) who render services to Uber through Uber’s mobile application. The plaintiffs each owned and operated their own transportation companies. They entered into written contracts with Uber on behalf of their companies, which included a driver addendum. The contract and addendum provide that the drivers are employees of the transportation companies, not of Uber. They also contain other language supporting independent contractor status.
How the Uber App Works
Uber drivers who are ready to pick up passengers log in to the Uber app and indicate that they are online. They can accept or reject trip requests by either pressing an “accept” button or doing nothing, in which case they have rejected the request. If a driver rejects three trips in a row, he or she is automatically moved to offline status, where he or she remains until going back online. Drivers may go to any location to be available for trips (except that there are special rules for certain locations like airports and train stations). While drivers are online, they are free to engage in personal activities, such as phone calls and business for their own transportation companies.
The Parties’ Positions in Razak
The drivers, who are classified as independent contractors, argued that they are legally employees and, therefore, should have received overtime pay under the FLSA and Pennsylvania law. According to the drivers, they are employees because Uber controls the way in which they perform services when they are on the Uber app, they do not have specialized skills, they are required to drive certain types and colors of cars, they perform an integral role in Uber’s business, and many have driven for Uber over a long period of time. Uber asserted that the plaintiffs are independent contractors because they operate their own businesses, they are free to work for other companies, they can hire their own workers, they can work when and how often they want, and they pay their own substantial expenses.
In evaluating whether the plaintiffs are employees under the FLSA, the court examined the factors articulated by the Third Circuit Court of Appeals in Donovan v. Dial America Marketing, Inc., 757 F.2d 1376 (3d Cir. 1985), for determining whether a worker is an employee under the FLSA: (1) the degree of the alleged employer’s right to control the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending on his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; (4) whether the service rendered requires a special skill; (5) the degree of permanence of the working relationship; and (6) whether the service rendered is an integral part of the alleged employer’s business. The Donovan opinion instructed courts to look at all of the circumstances and not rely on any particular factor. In analyzing the six Donovan factors, Judge Baylson found that four weighed heavily in favor of independent contractor status and only two supported employee status, neither of which the court found to carry much weight.
Susan also reviews the six factors and their impact on the decision. Source: Judge Holds UberBLACK Drivers Are Independent Contractors, Not Employees | Pepper Hamilton LLP – JDSupra