Wednesday, July 1, 2015

Are Ride-Sharing Companies Exempt from FLSA Overtime Because They Operate a Taxicab Business?

    In recent legal challenges, Uber, Lyft, and other so-called “ride-sharing” companies have argued that the drivers who contract with them are independent contractors, not their employees, for purposes of the Fair Labor Standards Act (FLSA) and other laws.  Their argument: We’re each mostly a technology platform for matching drivers and riders, not a transportation company.  This argument has not persuaded.  See, e.g., O’Connor v. Uber Techs. Inc., No. 3:13-CV-03826, 2015 WL 1069092, at *6-7 (N.D. Cal., March 11, 2015) (“Uber does not simply sell software; it sells rides. Uber is no more a ‘technology company’ than Yellow Cab is a “technology company” because it uses CB radios to dispatch taxi cabs . . . Uber only makes money if its drivers actually transport passengers.”).

    Yet, even if they lose the employee/independent-contractor fight, this comparison to taxicab companies might well cut partly in their favor down the road, because section 13(b)(17) of FLSA exempts from its overtime protections “any driver employed by an employer engaged in the business of operating taxicabs.” 29 U.S.C. § 213(b)(17).  Some State wage and hour laws do something similar.  E.g., N.Y. Labor Law § 651(5) (defining “employee” to exclude anyone employed “as a driver engaged in operating a taxicab”); 43 Penn. Stat. § 333.105(b) (exempting from State overtime requirements “[a]ny driver employed by an employer engaged in the business of operating taxicabs”); Calif. Industrial Wage Commission Order No. 9-2001, § 3(M) (2014) (“provisions of this section [on overtime] shall not apply to taxicab drivers”).

    So, is Uber, Lyft, or another “ride-sharing” company engaged in the “business of operating taxicabs” under FLSA § 13(b)(17)?  The U.S. Department of Labor’s Field Operations Handbook (1999 ed.) (DOL-FOH), chapter 24, says this:

24h01 “Business of operating taxicabs.” The taxicab business consists normally of common carrier transportation in small motor vehicles of persons and such property as they may carry with them to any requested destination in the community. The business operates without fixed routes or contracts for recurrent transportation. It serves the miscellaneous and predominantly local transportation need of the community. It may include such occasional and unscheduled trips to or from transportation terminals as the individual passengers may request, and may include stands at the transportation terminals as well as at other places where numerous demands for taxicab transportation may be expected.

DOL adopted this view in August 1974.  See also DOL-FOH 24h03(a)(4) (“airport limousine service” as example of work that falls outside this exemption).

    Since then, some judges have deferred to the DOL Handbook view in deciding whether a defendant-employer—often those that advertise as a limousine service—falls within this exemption. E.g., Cariani v. D.L.C. Limousine Services, 363 F. Supp. 2d 637, 645 (S.D.N.Y. 2005); Arena v. Plandome Taxi Inc., 2014 WL 1427907, at *15 (E.D.N.Y., April 14, 2014).  In contrast, in Rossi v. Associated Limousine Services, 438 F. Supp. 2d 1354, 1363 (S.D. Fla. 2006), the judge emphasized that while the defendant there let its customers “determine the destination of the vehicle,” it mattered more that it “advertises itself as a limousine company”; it was “not licensed to provide taxicab transportation”; its drivers “do not cruise for customers and cannot be hailed down by customers,” but prearrange transport; and it sets fares in advance based on a flat or hourly rate, not based on a taximeter.

    How does all this apply to Uber and other “ride-sharing” companies?  In some ways, they seem like a “taxicab” business described in DOL’s Handbook—their drivers provide mostly local transportation, without fixed routes, and they largely go where the customer tells them to go.  In other respects, it’s not so clear.  When you use the Uber app, is it like “hailing” or “flagging down” a taxicab on the fly?  Or is it more like prearranging transport, because Uber drivers are not supposed to pick up customers who don’t use the app to set up the ride?  See Opinion Letter, Wage and Hour Division, U.S. DOL, 1998 WL 852774, at *1 (April 17, 1998) (“The ordinary meaning of [“taxicabs”] contemplates vehicles that are offered for hire to the general public on city streets. While it is not necessary that all the transportation be provided to persons who ‘flag down’ the vehicles, that is an important aspect of the common meaning of ‘taxicab which your client's vehicles do not possess.”).

    In grappling with all this, it might matter that FLSA’s exemptions are supposed to be read narrowly, see Mitchell v. Kentucky Finance Co., 359 U.S. 290, 295 (1959), and consistent with their purpose. So, what’s that purpose?   Actually, it’s not at all clear.  One court searched the FLSA legislative history and couldn’t find “any explicit explanation for the taxicab exemption.”  Arena, 2014 WL 1427907, at *13.  Perhaps Congress exempted the taxicab business, because back then it was hard for employers to verify how many hours a driver spent looking for customers to pick up.  If so, that’s less of a problem now, because ride-sharing companies like Uber and Lyft have the technology to monitor precisely when a driver makes himself available for rides (via the ride-sharing app) and how long an actual ride takes from pick-up to drop-off.


--Sachin Pandya

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