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UberBLACK limousine drivers not employees of ride-sharing service

By Ronald Miller, J.D.

Limousine drivers for UberBLACK in the Philadelphia area failed to show that they were employees of the ride-share service, ruled a federal district court in Pennsylvania. Evidence indicated that the drivers spent a large portion of their time online but not actually completing trips, and that they engaged, for at least some of the time, in various personal activities. Accordingly, the court concluded that the drivers failed to meet their burden to show they were employees and that Uber was their employer, and so granted Uber’s motion for summary judgment (Razak v. Uber Technologies, Inc., April 11, 2018, Baylson, M.).

The limousine drivers brought a collective action against Uber alleging that the ride-sharing service violated the minimum wage and overtime requirements of the FLSA. They also alleged violations of the Pennsylvania Minimum Wage Act (PMWA) and Pennsylvania Wage Payment and Collection Law (WPCL). The plaintiffs were certified limousine drivers who provided rides through the UberApp. Among other things, the drivers sought back pay for their work driving passengers using the Uber App. Uber filed a motion for summary judgment on the question of whether the UberBLACK drivers qualified as “employees” of Uber under the FLSA and PMWA.

Uber limousine service. Gegan, LLC, is an Uber subsidiary that holds a certificate of public convenience from the Philadelphia Parking Authority (PPA) to operate a limousine company. Some of the UberBLACK transportation providers operate under Gegan’s PPA certificate, and approximately 75 percent of the drivers also use Gegan’s automobile insurance. Certain of the drivers owned and operated their own transportation companies. Still, Uber set the financial terms of all UberBLACK fares.

Drivers are free to reject trip requests for any reason, aside from unlawful discrimination. However, if a driver ignores three trip requests in a row, the UberApp will automatically move the driver from online to offline, making him ineligible to accept trip requests. Still, drivers are free to go back online at any point, including immediately after going offline. Uber places no restrictions on drivers’ ability to engage in personal activities while online. They are also allowed to use software applications other than the UberApp, and to provide services to others “outside of” the UberApp. Under the terms of the driver addendum, the UberBLACK drivers were considered to be independent contractors.

“On call” principles. Previously, in a September 2017 ruling, the court denied Uber’s motion for partial summary judgment as to whether the FLSA’s “on call” principles may extend to the “gig” economy. Specifically, the court found that certain undisputed factual issues indicated that the time drivers spent logged into the UberApp could be considered “predominantly” for the benefit of the employer rather than the employee.

Employee versus independent contractor status. Presently, Uber filed a motion for summary judgment as to whether the UberBLACK limousine drivers are employees or independent contractors. The seminal case in the Third Circuit for determining whether a worker is an employee under the FLSA is Donovan v. DialAmerica Marketing, Inc. The Donovan court set forth six factors for determining whether a worker is an employee, including the employer’s right to control and the alleged employee’s opportunity for profit or loss, among other factors.

At the outset, the court noted that the driver addendums entered by the limousine drivers and their companies, pointed to a lack of control by Uber. Although the drivers argued that Uber exercised extensive control over them when they were online, the court found significant indications that Uber did not exercise substantial control over the drivers, as they were able to hire subcontractors. Further, the drivers were free to determine their working hours. Thus, the court concluded that the first Donovan factor, the degree of control, weighed heavily in favor of independent contractor status.

Opportunity for profit or loss. The second Donovan factor, the alleged employee’s opportunity for profit or loss, also strongly favored the conclusion that the UberBLACK drivers were not employees. Here, it was undisputed that the drivers were permitted to work as much or as little as they would like. They were also permitted to choose their hours, and could concentrate their efforts around certain “high times” of the day to capitalize on “surge” pricing. Additionally, they could work for competitors or work for private clients. The drivers were free to make money elsewhere, even while actively remaining online.

Employee investment. Similarly, the third Donovan factor, the alleged employee’s investment in equipment or materials or employment of helpers, favored independent contractor status. The drivers purchased or leased expensive vehicles. The fact that Uber presented financing arrangements or offered insurance did not convert the company into an employer under the FLSA.

However, with respect to the fourth Donovan factor, the court noted that “driving” was not a “special skill,” and thus this factor weighed in favor of finding that the drivers were employees, despite the fact that they were expected to maintain a high level of customer service.

On the other hand, because UberBLACK drivers can work as little or as much as they want, the fifth Donovan factor weighed in favor of independent contractor status because of a lack of “relationship permanence” with the alleged employer. Finally, the court found that the sixth Donovan factor, whether the service rendered was an integral part of the alleged employer’s business, weighed in favor of employee status, and thus that the Uber drivers were essentially part of Uber’s business as a transportation company. Consequently, given the totality of the circumstances, the court determined that UberBLACK drivers failed to show that they were employees.