GIG ECONOMY LITIGATION DATABASE
Razak v Uber Technologies Inc (2020)
Citation/case number: 951 F.3d 137, 170 Lab.Cas. P 36,773, 2020 Wage & Hour Cas.2d (BNA) 77,956
Country: United States
Year: 2020
Court: United States Court of Appeals, Third Circuit
Status: Vacated and remanded
Topic/theme: Employment relationship
Issue: Benefits (Federal minimum wage and overtime requirements)
Claimant type: Individual
Respondent type: Corporation
Legislation considered: Fair Labor Standards Act of 1938, ยง 3
Factual background and procedural history
The claimants were part of a class of persons who provided limousine services, now known as UberBLACK, in Philadelphia, Pennsylvania. They brought this action on behalf of the class against Uber Technologies and its wholly-owned subsidiary, Gegen, LLC (together, "Uber") for violations of the federal minimum wage and overtime requirements under the Fair Labor Standards Act, the Pennsylvania Minimum Wage Act, and the Pennsylvania Wage Payment and Collection Law. The claim was premised on the argument that the class were employees, rather than independent contractors, and were therefore entitled to the benefit of these laws.
On 6 January 2016, the claimants commenced this action in the Court of Common Pleas of Philadelphia County. Uber successfully removed the action to the United States District Court for the Eastern District of Pennsylvania, asserting federal question and diversity jurisdiction. In the District Court, Uber moved to dismiss the case and compel arbitration, which motion was denied. Uber then moved for judgment on the pleadings, which the District Court granted in part and denied in part. The District Court found that the claimants had alleged sufficient facts to support that they were employees instead of independent contractors, such that judgment on the pleadings was not appropriate.
On 13 October 2016, the claimants filed an amended complaint, which Uber moved to dismiss in its entirety, and to strike certain portions of it in the alternative. The District Court again denied the motion to dismiss, finding that the claimants' allegations that they were logged into the Uber app and eligible to receive trip requests for more than 40 hours was sufficient to state a claim at the pleading stage under the Fair Labor Standards Act. However, the District Court found that the question of whether the claimants' time spent online was actually compensable work time within the meaning of the Fair Labor Standards Act was a dispositive issue, and designated the issue of compensability of the claimants' online time for expedited discovery.
After substantial discovery, Uber moved for partial summary judgment to determine if the time the claimants spent online on the Uber app should be considered compensable work time under the Fair Labor Standards Act and Pennsylvania Minimum Wage Act, assuming the claimants were employees and Uber was an employer. The court denied this motion, stating that the question of compensable work time might be closely linked to whether the claimants were employees or independent contractors. Once discovery was fully complete, Uber moved for summary judgment on the main issue of whether the claimants were employees or independent contractors. To determine employee status under the Fair Labor Standards Act, the District Court looked to the test outlined in Donovan v DialAmerica Marketing Inc, which consists of six factors:
- The degree of the alleged employer's right to control the manner in which the work is to be performed;
- The alleged employee's opportunity for profit or loss depending upon his managerial skill;
- The alleged employee's investment in equipment or materials required for his task, or his employment of helpers;
- Whether the service rendered required a special skill;
- The degree of permanence of the working relationship;
- Whether the service rendered is an integral part of the alleged employer's business.
In applying the six-factor test, the District Court found that four factors weighed in favour of independent contractor status. This included a lack of control by Uber in relation to the first factor, because the claimants had the ability to hire sub-contractors and work for competing companies. For the second factor, the court found that the claimants could work as much or as little as they wanted and choose not to accept trip requests. Because this factor did not require the claimants to be solely in control of their profits or losses, the claimants were unsuccessful in convincing the court that they were employees. In relation to the third factor, the claimants were required to purchase or lease their own expensive vehicle to drive for UberBLACK, demonstrating independent contractor status. The analysis also leaned towards independent contractor status under the fifth factor, because the degree of permanence of the working relationship was essentially left up to the claimants.
The District Court determined that only the fourth and sixth factors militated in the claimants' favour. The service they rendered did not really require a special skill, and the service was an essential part of Uber's business as a transportation company. The District Court held that there was no genuine dispute as to any material fact, and that a majority of the factors identified in DialAmerica leaned against employment status. Therefore, the District Court granted Uber's motion for summary judgment, concluding that the claimants did not qualify as employees under the Fair Labor Standards Act and Pennsylvania Minimum Wage Act but were instead independent contractors. The claimants appealed the summary judgment order.
Key issues for determination
Was the District Court's grant of summary judgment, finding the claimants to be independent contractors rather than employees, inappropriate due to genuine disputes of material facts?
Finding
The Third Circuit noted that for summary judgment to be appropriate, there must have been no genuine disputes as to any material facts on the record, entitling Uber to judgment as a matter of law. In the present case, the court found that several genuine disputes of material facts remained, and that summary judgment was thus a mischaracterization. For instance, the first DialAmerica factor of the "right to control" illustrated genuine disputes. While Uber determined what drivers were paid and directed drivers where to drop off passengers, it lacked the right to control the time periods during which drivers must drive. UberBLACK drivers exercised a high level of control, as they could drive as little or as much as they desired, without losing their ability to drive. However, Uber could deactivate drivers who fell short of the 4.7-star UberBLACK driver rating and could limit the number of consecutive hours that a driver may work, evidencing a degree of control.
In addition, material facts relevant to the second factor, namely "opportunity for profit or loss", presented a genuine dispute. The District Court ruled in favour of Uber under this factor, yet the Third Circuit believed the facts should swing otherwise. Uber decided the fare, which driver received a trip request, whether to refund or cancel a passenger's fare, and a driver's territory. While the claimants could drive for competitors, Uber might attempt to frustrate those who tried, and most of the factors that determined a driver's profitability, like advertising and price setting, were also controlled by Uber. The court believed that a reasonable factfinder could rule in favour of the claimants.
The fifth factor, being the degree of permanence of the working relationship, also presented genuine disputes of material fact. On one hand, Uber could elect to take drivers offline or block their access to the platform, and on the other hand, the claimants could drive whenever they chose to turn on the Uber app with no minimum amount of driving time required.
Based on the above, the court determined that summary judgment was inappropriate because genuine disputes of material facts remained.
Outcome
The Third Circuit vacated the District Court's grant of summary judgment and remanded the matter for further proceedings.
Link to judgment: Razak v Uber Techs Inc, 951 F.3d 137 (3d Cir.), amended, 979 F.3d 192 (3d Cir. 2020)
Link to District Court judgment: Razak v Uber Techs Inc, No. CV 16-573, 2018 WL 1744467 (E.D. Pa. Apr. 11, 2018)
Other relevant publications:
