As Judge Baylson of the U.S. District Court for the Eastern District of Pennsylvania noted at the beginning of his opinion, “[t]his case is the first to grant summary judgment on the question of whether drivers for UberBLACK are employees or independent contractors within the meaning of the Fair Labor Standards Act (“FLSA”) and similar Pennsylvania state laws.” Razak v. Uber Techs., Inc., Civil Action No. 16-573, 2018 WL 174467, 2018 U.S. Dist. LEXIS 61230 (E.D. Pa. Apr. 11, 2018). Although many of the cases against Uber are forced into arbitration, the plaintiffs in Razak had opted-out of arbitration through a procedure contained in Uber’s Service Agreement. As a result, Uber has obtained a decision that may impact other cases brought against it under similar legal theories, and may impact other ride-sharing companies as well.
The plaintiffs in Razak claimed that they and other UberBLACK drivers were owed overtime and other benefits afforded by law to employees because Uber misclassified them as independent contractors. Courts analyzing whether a worker is an employee or an independent contractor for purposes of the FLSA (as well as some state wage & hour laws, including the Pennsylvania Minimum Wage Act) utilize some version of the “economic reality test,” which includes a number of factors that a court may consider to make that determination. As the Razak court recognized, the Third Circuit uses a six-factor test. The Razak court analyzed each of those factors regarding the UberBLACK drivers and found that all but two weighed in favor of classifying the drivers as independent contractors. The following facts were especially important to the court’s determination:
- The plaintiffs, as business owners, were permitted to hire “helpers” as substitute drivers using the plaintiffs’ vehicles, and any money earned by the helpers would be paid to the plaintiffs’ businesses.
- The plaintiffs could, and did, choose to work for competitors or provide transportation to private clients when the opportunity for profit was greater.
- The plaintiffs were “completely free to determine their working hours,” subject only to limitations for quality or safety standards, and could work as little or as much as they wanted.
- All UberBLACK drivers were required to purchase or lease their own vehicles.
The question of whether an individual is an employee or independent contractor is a fact-specific determination based upon the entire relationship between the worker and the business. As a result, this decision may not have much impact beyond Uber and similar ride-sharing services due to the unique nature of that particular industry. However, just as the Razak court looked to other decisions in an attempt to analogize those working relationships with those of the UberBLACK drivers, companies—particularly those who rely on independent contractors as part of the “gig economy”—can look to the Razak court’s analysis to assist their own determinations of whether a worker is an independent contractor under the law.
 Donovan v. DialAmerica Marketing, Inc., 757 F.2d 1376 (3d Cir. 1985).
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.
Jeffrey B. Cadle is an attorney in Obermayer’s Pittsburgh Office, practicing in the areas of commercial litigation and employment law. He can be reached at 412-288-2473 or Jeffrey.Cadle@obermayer.com.