Uber Limo Drivers Are Contractors, Not Employees, Federal Judge Rules

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U.S. District Judge Michael Baylson of the Eastern District of Pennsylvania ruled Wednesday that Uber Technologies Inc [UBER.UL] limo drivers are independent contractors, rather than actual employees of the rideshare company under federal law.

Uber won Razak v. Uber Technologies Inc lawsuit over its limo drivers who claimed that the company has failed to meet minimum wage and overtime requirements.

The ruling was the first of its kind on an issue that has significance for the ride-hailing company. The minimum wage and overtime requirements are set in Fair Labor Standards Act, which only applies to employees. The issue of the litigation was whether, in fact, UberBlack limousine service drivers are employees of the company or contractors.

The judge ruled out that the drivers, actually, are contractors rather than employees. He asserted that Uber did not restrict drivers’ ability to engage in personal activities while online. He referred to the facts showing that while online, plaintiffs accepted rides from private clients. They also did personal errands, smoked, took personal phone calls or rejected trips because they were tired.

Sacks Weston Diamond attorney Jeremy Abay representing the drivers plans to appeal the decision to the Third Circuit. The unhappy drivers say the company, in fact, exercised significant control over them, such as they kicked drivers off if they failed to accept a certain amount of rides. Uber also deactivated drivers who fell below certain customer satisfaction level.

To determine whether a worker is an employee under the Fair Labor Standards Act, Baylson based his opinion on the criteria included in the U.S. Court of Appeals for the Third Circuit’s 1985 ruling in Donovan v. DialAmerica Marketing.

Jeremy Abay contended that Donovan remains the controlling case in the Third Circuit. He is curious if the Third Circuit alters or updates the Donovan test saying it “can be more aptly applied in gig economy cases”.

Bayson was the first judge to rule on the classification of Uber drivers under federal law. A similar lawsuit was made at the state appeals court in Florida last year which concluded that Uber’s drivers were not its employees under Florida law. The state agencies in California and New York say they are under those states’ laws.

The Uber driver’s case is typical in a sense that courts across the country are confronting the issue of how to apply traditional business and legal concepts to the emerging gig economy. Legal certainty is yet to come.

The case is Razak v. Uber Technologies Inc, U.S. District Court for the Eastern District of Pennsylvania, No. 2:16-cv-00573

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