Ali Razak v. Uber Technologies Inc
Precedential (2020)
Rule of Law:
Summary judgment on the question of whether a worker is an employee or independent contractor under the FLSA is inappropriate when genuine disputes of material fact exist regarding the application of the Donovan v. DialAmerica Marketing, Inc. economic reality test factors.
Facts:
- Plaintiffs Ali Razak, Kenan Sabani, and Khaldoun Cherdoud are Pennsylvania drivers who utilize Uber Technologies’ ride-sharing mobile phone application (Driver App) to provide limousine services, known as UberBLACK, in Philadelphia.
- To drive for UberBLACK, drivers must form Independent Transportation Companies (ITCs), which then enter into a Technology Services Agreement with Uber and sign a Driver Addendum.
- Uber holds a certificate of public convenience from and is licensed by the Philadelphia Parking Authority (PPA) to operate a limousine company, and some UberBLACK transportation providers operate under Uber’s PPA certificate.
- UberBLACK drivers use the Driver App to go online, can choose to accept trip requests (but must accept within 15 seconds), and are automatically moved offline if they ignore three consecutive requests or reach a 12-hour driving limit.
- Uber sets the financial terms of all UberBLACK fares, charges riders, collects a commission, and then deposits the remaining payment into the transportation company’s Uber account for distribution to the driver.
- Drivers are generally dispatched based on proximity, do not know the demand for drivers or a rider’s final destination before accepting a trip, though a queue system exists at major transportation hubs.
- Plaintiffs claim that they are employees under the FLSA because they are controlled by Uber when online and perform an integral role for Uber’s business, contending that Uber controls the access and use of the Driver App.
- Uber asserts that drivers are entrepreneurs, not restricted from working for other companies, pay their own expenses, and can use UberBLACK as little or as much as they want, and that Uber places no restrictions on drivers’ personal activities while online.
Procedural Posture:
- Plaintiffs commenced the action in the Court of Common Pleas of Philadelphia County.
- Defendants successfully removed the action to the United States District Court for the Eastern District of Pennsylvania, asserting federal question and diversity jurisdiction.
- Uber moved to dismiss the case and compel arbitration, or alternatively, to stay the action; the District Court denied both motions, finding Plaintiffs complied with arbitration opt-out procedures.
- Uber then moved for judgment on the pleadings, which the District Court granted in part and denied in part, finding Plaintiffs alleged sufficient facts to support employee status.
- Plaintiffs filed an Amended Complaint, which Uber moved to dismiss in its entirety; the District Court denied this motion, finding allegations of being "Online" for over 40 hours sufficient to state a claim under the FLSA.
- Uber moved for partial summary judgment on whether online time was compensable work time, assuming employee status; the District Court denied this motion, determining the compensability question was intertwined with the employee versus independent contractor question.
- After discovery was complete, Uber filed a motion for summary judgment on the dispositive question of whether Plaintiffs are employees or independent contractors.
- The District Court granted Uber’s motion for summary judgment, ruling that Plaintiffs do not qualify as “employees” of Uber under the FLSA and PMWA as a matter of law.
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Issue:
Was it appropriate for the District Court to grant summary judgment, determining that UberBLACK drivers are independent contractors as a matter of law under the FLSA and PMWA, given the existence of genuine disputes of material fact regarding the application of the DialAmerica economic reality test factors?
Opinions:
Majority - Greenaway, Jr., Circuit Judge
No, it was not appropriate for the District Court to grant summary judgment because genuine disputes of material fact existed regarding the application of the DialAmerica economic reality test factors, precluding a determination as a matter of law. The Third Circuit exercises plenary review over summary judgment grants and must vacate if there is a genuine dispute as to any material fact. The District Court's decision was based on a flawed premise that its ruling derived from undisputed facts, but the Plaintiffs submitted nearly a hundred pages of disputes going to the core of the DialAmerica factors, which must be resolved by a fact-finder. Specifically, regarding the "right to control" factor, disputes existed over whether drivers operated entirely within Uber’s rules, whether they could truly work for competitors while online for Uber, Uber's deactivation policies, and Uber's alleged coercion of drivers through automatic deductions and trip limitations. For the "opportunity for profit or loss depending on managerial skill" factor, the District Court found it favored independent contractor status because drivers could be strategic and work for competitors. However, the appellate court found material disputes as Uber controls fares, trip assignments, refunds, and territory, and Uber may frustrate drivers trying to work for competitors. The court also noted genuine disputes regarding the "permanence of the working relationship." While the court agreed that driving is not a "special skill" and that the service is integral to Uber's business (factors weighing in favor of employee status), the numerous disputed facts on other factors rendered summary judgment inappropriate. The ultimate question of employee status is a question of law for a judge, but the factual disputes underlying the DialAmerica factors must be resolved by a fact-finder first.
Analysis:
This ruling significantly raises the bar for obtaining summary judgment in cases involving the DialAmerica economic reality test, particularly for companies operating in the "gig economy." It clarifies that even where some factors might favor independent contractor status, a genuine dispute of material facts on other factors requires the case to proceed to an evidentiary hearing or trial for fact-finding. This ensures that the nuanced, fact-intensive inquiry of economic reality is thoroughly conducted, preventing premature dismissal of employee misclassification claims and potentially leading to more cases proceeding beyond the summary judgment stage.
