“Uber” Uncertainty

“UBER” UNCERTAINTY: WHY COURTS ARE ILL-EQUIPPED TO DETERMINE COMPENSABILITY IN A GIG ECONOMY

By: Joshua Greenberg, Volume 102 Staff Member

In an increasingly digital world, people are finding new ways to earn a living. Specifically, the “gig economy,” also known as “on-demand employment,” continues to “grow[] at a rapid rate along with the supply of gig-workers who provide their labor on a short-term basis via digital platform technologies.”[1] Gig workers aren’t confined to one particular occupation and individual gigs can range from quick, five-minute surveys, to an eighteen-month database management project.[2] One of the more popular gigs in this growing market is driving for digital ride-hailing companies like Uber and Lyft. Uber, for example, has approximately 1.1 million active drivers worldwide, more than 400,000 of which are in the United States.[3] The surge of this novel type of work has created puzzles for courts as “[e]stablished legal principles are being in applied in . . . unconventional and highly variable settings. It is not clear that existing law[s] [are] adequate to address the special issues raised by [gig economy] platforms.”[4] While agencies and regulators play catch-up, courts nationwide are currently trying to sort through some of these issues.

At the heart of most legal issues arising in the gig economy is the question of whether a gig worker is an employee or an independent contractor.[5] One recent case dealing with this gig economy issue—Razak v. Uber[6]—is a putative class action lawsuit “lead by plaintiffs Ali Razak, Kenan Sabani, and Khaldoun Cherdoud, who are seeking to represent a class of [UberBlack drivers]”—Uber’s luxury car service.[7] The Plaintiffs claim that Uber misclassified the drivers as independent contractors[8] and brought suit alleging violations of the Fair Labor Standards Act (FLSA)[9]—specifically that Uber failed to comply with “federal minimum wage and overtime requirements.”[10] The most recent order in the case denied Uber’s motion for partial summary judgment on the issue of whether “the time [the Plaintiffs] spent Online the Uber App [could be considered] compensable work time under the FLSA,” and kept the putative class action alive as the parties continue discovery.[11] This Post summarizes the rationale behind the court’s most recent order in Razak and compares its analysis to similar decisions in different jurisdictions. This Post concludes that legislatures and regulators (state and/or federal) are better suited to develop the framework for analyzing compensability of on-call time and the broader question of employee versus independent contractor status in a gig economy.

I. SUMMARY OF RAZAK V. UBER TECHNOLOGIES, INC.

After denying Uber’s motion to dismiss the Plaintiffs’ amended complaint,[12] the court “designated the issue of compensability of Plaintiffs’ Online time for expedited discovery” because it was, and still is, “an important, potentially dispositive [issue] in this case.”[13] UberBlack drivers may log on to the Uber App to check their account status, but “are not eligible to receive trip requests from riders . . . [until they press] a button to go online (‘Online’).”[14] It is the period of time spent driving around while Online looking for riders that the Plaintiffs allege is compensable under the FLSA.[15] For the purposes of considering Uber’s motion for partial summary judgment, the court assumed that the Plaintiffs were “employees” and Uber an “employer” under the FLSA.[16] The court also accepted, for the purposes of the motion, that the Plaintiffs’ time spent Online ranged from, on average, seven to twelve hours per day, that a large proportion of that time was spent not actually completing trips, and that Plaintiffs spent some Online time engaged in various personal activities.[17]

Under the FLSA, employees must receive at least one-and-a-half times pay for overtime work exceeding forty hours per week.[18] The FLSA does not define “work” and sheds no light on “whether time spent ‘on call’ is compensable ‘work’ within the meaning of the statute.”[19] Department of Labor (DOL) regulations “indicate that on-call time is compensable if the employee . . . finds his time on call away from the employer’s premises is so restricted that it interferes with his personal pursuits.”[20]

The Supreme Court has spoken to the issue of on-call time compensability in two cases: Armour & Co. v. Wantock[21] and Skidmore v. Swift & Co.[22] “In both cases, the Supreme Court stressed that the facts and circumstances of each case should determine whether periods of waiting for work should be compensable under the FLSA.”[23] The Court of Appeals for the Third Circuit employs the Ingram[24] factors to determine whether on-call policies significantly interfere with an employee’s personal life such that the on-call time is compensable.[25] Other circuits have applied the Ingram factors in determining the compensability of on-call time and some use different, yet similar, tests that give certain factors more weight.[26]

District courts in circuits other than the Third Circuit have also looked at the specific question of compensability of time spent Online the Uber app.[27] Three district court cases from outside of the Third Circuit[28] have concluded that determining the compensability of on-call time is a fact-intensive process. In all three of those cases the courts held that the plaintiffs had failed to plead sufficient facts to support their claims.[29] The court in Razak noted that “[t]hese cases (1) suggest that the on-call framework is applicable to the unique facts present in these Uber driver cases, and (2) offer insight into the types of factual questions that will be most relevant when applying the on-call framework; namely what ability drivers have to conduct personal business while Online the Uber App.”[30]

In the Razak case, unsurprisingly, Plaintiffs and Uber framed the relevant facts differently.[31] Uber argued that because drivers “could go offline whenever they chose to do so, and were not required to respond in any way upon receiving a trip request,” Razak’s situation was an atypical on-call case. Typically, Uber argued, “the nature of compensable . . . on-call scenarios presupposes an obligation to remain on-call during the specified time . . . .”[32] In contrast, Plaintiffs argued that Uber’s interpretation of the facts “ignore[d] the key novel issue . . . namely, the reality that the ‘gig economy’ has ushered in a new ‘Gilded Age,’” and that “Uber’s interpretation of the facts leads to the result that absolutely ‘no Online time is compensable’ because ‘even if . . . drivers are employees, they can refuse to work.’”[33] Despite framing the facts differently, both parties applied the facts to Ingram in their briefs and advocated for a novel application of a test that is “not readily applicable to an entirely new, app-centered technology in the new ‘gig economy.’”[34] The court, however, was reluctant to establish any broad rules relating to a hugely popular and successful technology like Uber, and instead determined that “[l]egislation or regulatory agency action is better suited to govern the impact of new technology on daily life activities.”[35]

Nevertheless, in denying Uber’s motion, the court focused on the extent to which the drivers’ abilities to engage in personal activities while Online was restricted.[36] Specifically, four undisputed facts “prevent[ed] the [c]ourt from finding, as a matter of law, that Plaintiffs’ time [was] not compensable.”[37] The court held that those facts could be reasonably considered severe restrictions on drivers’ abilities to engage in personal activities.[38]

II. INADEQUACY OF CURRENT FRAMEWORK

As the court in Razak noted, “Ingram is not readily applicable to an entirely new, app-centered technology in the . . . ‘gig economy.’”[39] While further discovery will eventually allow the court to determine the compensability of Plaintiffs’ on-call time under Ingram, looking at emerging occupations through a lens that was developed in a different era will continue to force courts to stretch their previously-applied standards in an effort to fit a square peg into a round hole. The best solutions for these types of inquiries should come from the legislature and regulatory bodies because they are more politically accountable than the judiciary[40] and can develop new legal frameworks that more accurately reflect the reality of the ever-growing gig economy.[41]

Despite “strong legal arguments in favor of independent contractor status” and Uber settling or winning “most of the lawsuits alleging [that] drivers have employee status,” there are arguments on the other side and “[c]ourts could rule that many gig workers are employees.”[42] A modern legislative and/or regulatory solution clarifying the status of gig workers as independent contractors or employees would help to balance worker protections with corporate flexibility.[43] There are reasonable arguments in favor of classifying gig workers as both independent contractors[44] and employees,[45] but it is unclear what a modern solution would look like in practice.[46] Regardless, if legislatures and regulators (states and/or federal) do decide to address the narrow issue of on-call time compensability or the broader issue of employee versus independent contractor status in a gig economy, the current uncertainty surrounding these issues would at least be somewhat reduced.

  1. Orly Lobel, The Gig Economy & the Future of Employment and Labor Law, 51 U.S.F. L. Rev. 51, 51 (2017).
  2. Elka Torpey & Andrew Hogan, Working in a Gig Economy, Bureau Lab. Stat.: Career Outlook (May 2016), https://www.bls.gov/careeroutlook/2016/article/what-is-the-gig-economy.htm.
  3. Lobel, supra note 1, at 51 (citing Alex Rosenblat, The Truth About How Uber’s App Manages Drivers, Harv. Bus. Rev. (Apr. 6, 2016), https://hbr.org/2016/04/the-truth-about-how-ubers-app-manages-drivers); Natalia, Remarks as Prepared for Delivery by Uber Chief Advisor David Plouffe, Uber Newsroom (Nov. 4, 2015), https://www.uber.com/newsroom/1776/.
  4. Dan Eaton, Gig Economy Creates Legal Puzzles for the Courts, San Diego Union-Trib. (Sept. 3, 2017, 6:00 AM), http://www.sandiegouniontribune.com/business/technology/sd-fi-labor-eaton-column-20170807-story.html.
  5. See, e.g., id. (explaining that “the legal status of workers who earn income through online job platforms is uncertain” and that “resolving whether [gig workers] are employees, independent contractors, or [something else entirely] will resolve a host of other legal questions”).
  6. Razak v. Uber Techs., Inc., No. 16-573, 2017 WL 4052417 (E.D. Pa. Sept. 13, 2017).
  7. Dorothy Atkins, Uber Can’t Get Partial Win in Drivers’ ‘On Call’ Fight, Law360 (Sept. 13, 2017, 7:38 PM), https://www-law360-com.ezproxy.law.umn.edu/articles/963673?scroll=1.
  8. Id.
  9. 29 U.S.C. § 201–19 (2015).
  10. Razak, 2017 WL 4052417, at *1.
  11. See id.; Atkins, supra note 7.
  12. See Razak v. Uber Techs., Inc., No. 16-573, 2016 WL 7241795, at *6 (E.D. Pa. Dec. 14, 2016) (finding Plaintiffs’ allegations that they were logged into the Uber App for more than forty hours in a given week sufficient at the pleading stage to state a claim for overtime pay under the FLSA).
  13. Id.
  14. Razak, 2017 WL 4052417, at *4.
  15. Id. at *1.
  16. Id.
  17. Id. at *6.
  18. 29 U.S.C. § 207(a) (2015).
  19. Razak, 2017 WL 4052417, at *7.
  20. Id. See also Application of the Fair Labor Standards Act to Employees of State and Local Governments, 29 C.F.R. § 553.221(d) (1987).
  21. Armour & Co. v. Wantock, 323 U.S. 126 (1944).
  22. Skidmore v. Swift & Co., 323 U.S. 134 (1944).
  23. Razak, 2017 WL 4052417, at *8.
  24. Ingram v. City of Bucks, 144 F.3d 265 (3d Cir. 1998).
  25. “The leading case in the Third Circuit regarding the compensability of on-call time is Ingram.” Razak, 2017 WL 4052417, at *8. The Ingram factors are: (1) whether the employee may carry a beeper or leave home; (2) the frequency of calls and the nature of the employer’s demands; (3) the employee’s ability to maintain a flexible on-call schedule and switch on-call shifts; and (4) whether the employee actually engaged in personal activities during on-call time. Ingram, 144 F.3d at 268.
  26. Id. See, e.g., Whitten v. City of Easley, 62 Fed. Appx. 477, 479–80 (4th Cir. 2003) (applying a test identical to the Ingram factors); Owens v. Local No. 169, Ass’n of W. Pulp & Paper Workers, 971 F.2d 347, 350 (9th Cir. 1992) (outlining a seven-factor test to determine the extent to which employees may pursue personal activities during on-call shifts such that their time is compensable); Bright v. Houston Nw. Med. Ctr. Survivor, Inc., 934 F.2d 671, 674–75 (5th Cir. 1991) (en banc) (focusing on the restrictions imposed by the employer for what an employee could do during on-call time).
  27. Razak, 2017 WL 4052417, at *12.
  28. Bradshaw v. Uber Techs., Inc., No. CIV-160388-R, 2017 WL 2455151 (W.D. Okla. June 6, 2017) (located within the Tenth Circuit); O’Connor v. Uber Techs., Inc., 201 F. Supp. 3d 1110 (N.D. Cal. Aug. 18, 2016) (located within the Ninth Circuit); Yucesoy v. Uber Tech., Inc., No. 15-CV-00262-EMC, 2016 WL 493189 (N.D. Cal. Feb. 9, 2016) (located within the Ninth Circuit).
  29. See Bradshaw, 2017 WL 2455151, at *9; O’Connor, 201 F. Supp. 3d at 1125; Yucesoy, 2016 WL 493189, at *5–6.
  30. Razak, 2017 WL 4052417, at *13.
  31. Id. at *14.
  32. Id.
  33. Id. (citations omitted).
  34. Id. at *15.
  35. Id. (“This is particularly true given that, based on the evidence currently in the record, the compensability question may be inextricably intertwined with the threshold employee versus independent contractor question.”).
  36. Id.
  37. The four undisputed facts were: (1) ride requests are considered to be automatically rejected if not accepted by the driver within 15 seconds; (2) if a driver rejects three ride requests in a row (including automatic rejections), they are switched Offline, at which point they cannot receive any more ride requests; (3) drivers have no knowledge of the length of the potential ride before pressing “accept”; and (4) drivers must physically be in certain geographical areas (such as, a parking lot or other zone) to pick up passengers at the 30th Street Train Station or the Airport. Id.
  38. Id. at *16. The court found that the fifteen-second window to respond to trip requests, the automatic switching of drivers’ Online status to Offline after three ignored trip requests, and the physical restrictions for Airport and Train Station trips could all be reasonably considered as restrictions on the drivers’ abilities to engage in personal activities. Id.
  39. Id. at *15 (noting that the Ingram factors themselves, such as “whether the employee may carry a beeper or leave home,” demonstrate that the test is not easily applicable to novel technologies).
  40. The court also noted that “judge[s] must tread carefully before establishing any broad rules relating to a highly successful and popular new technology like Uber, which has drastically changed the transportation landscape . . . [and] threatened the value and existence of taxicabs.” Id.
  41. Id. (“This is particularly true given that, based on the evidence currently in the record, the compensability question may be inextricably intertwined with the threshold employee versus independent contractor question.”). See also Eaton, supra note 4 (advocating for a legislative solution that starts with the States to address employment and independent contractor issues in the gig economy).
  42. James Sherk, The Rise of the “Gig” Economy: Good for Workers and Consumers, Heritage Found. (Oct. 7, 2016), http://www.heritage.org/jobs-and-labor/report/the-rise-the-gig-economy-good-workers-and-consumers.
  43. See Regulating the Gig Economy, World Bank (Dec. 22, 2015), http://www.worldbank.org/en/news/feature/2015/12/22/regulating-the-gig-economy.
  44. See Sherk, supra note 42 (arguing that because “[c]lassification as employees or contractors has little effect on gig workers’ net earnings,” designating gig workers’ status as employees would result in “companies tak[ing] control over workers’ schedules and activities—undermining [the] attraction of [the gig economy] to workers”).
  45. See Regulating the Gig Economy, supra note 43 (arguing that many gig workers are “employees in disguise,” and “employers are not paying the true costs for employing them” by externalizing costs through an independent contractor classification) (citation omitted).
  46. Some proposed legislative solutions include: (1) creating a temporary safe harbor for gig economy jobs to protect the growing “gig-economy sector” from widespread litigation while allowing companies to experiment with “alternative work arrangements, such as providing benefits or training, without the risk of being declared employers”; and (2) equalizing tax benefits for self-employed workers. Sherk, supra note 42. Others also advocate for a solution originating with states’ legislatures as opposed to federal legislation and regulation. Eaton, supra note 4 (“Legislation should start in the states because of the traditional function of the states as laboratories of democracy.”).
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