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NY rideshare drivers granted preliminary injunction to receive unemployment insurance benefits, expedite qualification process

By Kathleen Kennedy-Luczak, J.D.

Given the companies’ known refusal to provide drivers’ earnings information, the NYDOL has the duty to obtain necessary wage data to ensure prompt payment of benefits when due.

In a lawsuit brought by four former app-based drivers and the New York Taxi Workers Alliance (NYTWA) alleging violations of the Social Security Act, the Equal Protection Clause, and Section 1983 for failure to pay unemployment insurance (UI) benefits when due, a federal district court in New York granted in part a preliminary injunction requiring the New York Department of Labor (NYDOL) to convene a working group to address such drivers’ requests for benefits in a prioritized manner. Noting that the COVID-19 pandemic had exacerbated an already-existing problem, the court found that the NYDOL’s delay or denial of benefits was sufficient to establish irreparable harm to the app-based drivers (Islam v. Cuomo, July 28, 2020, Hall, L.).

Requests for reconsideration. Due to the COVID-19 pandemic, the former Uber and Lyft drivers were forced to stop working and applied for UI benefits through the NYDOL. Generally, as part of the benefit qualification process, the NYDOL uses wage and earnings data submitted by employers. Despite the 2018 New York State Unemployment Insurance Appeals Board decision affirming determinations that app-based drivers are employees for UI benefits purposes, the companies employing such drivers have not universally provided driver wage data to the NYDOL. As a result, the drivers were notified that they were ineligible for benefits due to lack of earnings. They submitted their 1099 earnings information and filed requests for reconsideration. After months passed, the drivers and NYTWA, a driver advocacy organization, moved for a preliminary injunction. The drivers sought immediate payment of benefits and requested that app-based for-hire vehicle (FHV) companies be required to provide wage and earnings data or, allow a process for drivers to self-attest to their gross quarterly earnings.

Irreparable harm. The drivers argued that the delay or denial of UI benefits was the result of systemic failures at the NYDOL, in violation of the “when due” clause of the Social Security Act. Initially, the court noted that protracted denial of subsistence benefits constitutes irreparable harm justifying the remedy of preliminary injunctive relief. In addition, the court stated that the current health crisis has led to increased unemployment. Likewise, the drivers’ benefit delays and denials impacted the work of the NYTWA. Consequently, the court was convinced that the NYDOL’s delays or denials of UI benefits to the app-based drivers was sufficient to establish irreparable harm.

Claims not moot. The NYDOL argued that the drivers’ claims were moot because, since the filing of the action, they were approved for the maximum amount of benefits allowed. Yet, the court was not persuaded. It was reasonable to expect that the NYDOL’s conduct could occur again. The drivers could still be found ineligible upon recertification and other NYTWA members could be subject to denials in the future if the NYDOL’s practices were not addressed.

Success on the merits. Next, the court turned to whether the drivers demonstrated a likelihood of success on the merits of the case. The court found that the state owes a duty to workers to act in a manner that comports with the Social Security Act, including ensuring full payment of benefits “when due.” Although the drivers’ complaint related to conduct by the NYDOL that preceded any eligibility determination, the court found that it could still be the basis to determine if benefits were provided when due. Had the drivers been approved for benefits at the outset, they could have received them within two to three weeks, rather than after the months they waited during the reconsideration.

“Gamesmanship” recognized. Finally, the court stated that the NYDOL has long been on notice that the app-based FHV companies have taken the position that the drivers are self-employed and that they need not broadly report wages and earnings. In addition, the court noted the common practice by the companies of appealing the NYDOL’s determinations that a driver is an employee but subsequently abandoning the request for a hearing on the issue. If a determination that a driver is an employee was broadly applied, then the companies would be required to report wage data for all drivers. Although it is permitted under the law, the NYDOL itself attested that this practice of “appeal and abandon” amounted to “gamesmanship.”

NYDOL duty. Regardless of the difficulty in obtaining drivers’ wage and earnings data universally, it should not result in delays to the prompt payment of benefits. The NYDOL need not in the first instance look exclusively to employer-provided information. Rather, the court concluded, the NYDOL has the duty to obtain the necessary information, in the first instance, from other appropriate sources as allowed under the law. For example, from the drivers’ 1099 and 1040 tax forms. The NYDOL’s failure to do so resulted in a delay in the payment of UI benefits to the app drivers in violation of the “when due” clause. The balance of hardships weighed in the drivers’ favor. The motion for a preliminary injunction was granted in part.