The Third Circuit recently revived Philadelphia-based UberBlack drivers’ class action claims that Uber misclassified them as independent contractors to deny them proper minimum and overtime wages under the Fair Labor Standards Act and Pennsylvania law.
A three-judge panel vacated U.S. District Judge Michael Baylson’s April 2018 decision granting summary judgment to Uber, saying there is not yet a clear answer to the question of whether UberBlack drivers are employees or independent contractors, so the dispute should be allowed to go to trial.
A company’s control over a worker is a major factor in determining whether an employee or independent contractor relationship exists. While UberBlack drivers set their own schedules and have some ability to select passengers, a judge or jury must determine if Uber still maintains the right to control several aspects of their work and their opportunities for profit.
The decision only applies to UberBlack drivers in Pennsylvania and only has precedential value in the Third Circuit, which includes New Jersey and Delaware. But legal observers say the case could have broad impact, as it may test the fundamental framework of the rideshare company’s workforce model.
Uber has been hit with worker classification lawsuits for years, forcing it to defend its business model that leans on independent contractors. The model, adopted by other gig companies such as Lyft Inc., DoorDash Inc., and Grubhub Inc., allows workers freedoms outside a traditional work arrangement. But as independent contractors, they are not entitled to benefits guaranteed to employees, such as overtime, minimum wage, and workers’ compensation.
According to a Bloomberg study, Uber’s expenses per driver could spike by more than 20% if they have to reclassify them as employees.
While this isn’t a final ruling on the issue, the appellate court made clear that Uber still retains significant control over what the drivers are paid and where they drive to, which could show employee status. Uber determines the fare, the driver’s territory, which driver gets a trip request, whether to refund or cancel passenger fares, and company advertising. The company also can deactivate UberBlack drivers if their passenger-satisfaction rating falls below 4.7 stars and prevent them from accepting rides through other platforms, which weighs in favor of employment status.
Nevertheless, UberBlack drivers own and operate their own independent transportation companies, and can drive as much or as little as they want to, transport private clients, drive for competitors, and strategically use the Uber mobile application to obtain more lucrative trips. Those factors would weigh in favor of independent contractor status.
The forthcoming ruling on this case will impact a number UberBlack drivers in the Third Circuit states, as well as throughout the country.