In April 2017, a federal appeals Court in New York issued a ruling that may (or may not!) have a ripple effect on gig economy workers and businesses. In 2014 a federal district court ruled in favor of Corporate Transportation Group and its affiliate companies (CTG) that run a black-car service in New York City and the surrounding area. CTG was the defendant in a class action filed by drivers seeking unpaid overtime under New York State wage and hour laws and the Fair Labor Standards Act (FLSA).
CTG offers the black-car drivers support services including “operating dispatch bases and providing billing, bookkeeping, accounting, and various other services to keep the business moving.” The 700 plus drivers have various ways to secure clients including making private arrangements directly with the passengers, waiting in high traffic areas to pick up people who need rides or accessing the CTG dispatch service through an app that connects riders and drivers.
CTG classified the drivers as independent contractors. The drivers, to prevail in their lawsuit, needed to demonstrate that they were employees and, therefore, entitled to overtime pay. The District Court in 2014, ruled in favor of CTG, deciding that CTG properly classified the drivers as independent contractors and, therefore, they did not have a legal right to overtime wages. After a long wait, the Court of Appeals affirmed the decision of the lower court.
Regardless of the specific type of business involved, courts apply what they call an “economic realities” test and examine the totality of circumstances to determine if a worker is an independent contractor or employee.
Factors include “how the parties defined their relationship, the workers’ freedom to work other jobs in the same industry, the workers’ investment and economic returns, and schedule flexibility.”
In the case of CTG, the Court determined that the drivers were effectively owners of individual businesses who exercised “significant business acumen” about how to operate them, and the extent and way they wished to affiliate with CTG. The Court stated, “[t]hey worked for multiple black car services; cultivated their own clients apart from the franchisers; invested thousands of dollars in their cars, licenses and other business costs; and decided when, where and how regularly to work.”
The Court concluded that the CTG drivers were independent contractors, proprietors of their own businesses and not employees. Therefore, they did not recover the overtime pay they were seeking.
One of the interesting issues arising from this case is whether it will set a precedent for some of the other cases currently pending in our court system. It is no secret that Uber drivers, for example, are seeking status as employees and all of the benefits that go with that classification. Uber competitors like Lyft and other popular gig businesses face potential misclassification issues.
Some individuals suggest that the case of CTG will make it more difficult for workers like Uber drivers to secure employee status. Others, however, claim that there are significant differences between Uber drivers and CTG drivers that suggest misclassification lawsuits against Uber and other gig-businesses may have different outcomes. Bloomberg BNA reported that the attorney for the drivers in the case against CTG stated that “the court “made it very clear” that the decision is “very particular” to these drivers’ cases.”
Don’t assume that the CTG outcome applies to your situation- every situation is different and should be analyzed on a case by case basis!
If you think you are an employee who has been misclassified as an independent contractor, contact wage and hour attorneys at Leeds Brown Law, P.C. You may be entitled to recover unpaid overtime, minimum wage, back pay and other benefits that employees receive.
Leeds Brown, representing misclassified workers in New York City and the surrounding areas, can be reached 24/7 by calling 1-800-585-4658. Don’t wait to enforce your rights. Contact Leeds Brown today.