Hunt & Associates P.C.

Are Cab Drivers Employees or Independent Contractors? It All Depends…

Taxi cabA recent decision from our federal appeals court ruled that drivers of the Yellow Cab Company in Phoenix, Arizona are not employees of the cab company but, instead, are independent contractors who are not entitled to the minimum wages required by either Arizona law or the federal Fair Labor Standards Act (FLSA)[1].  The decision was issued by the U.S. Court of Appeals for the Ninth Circuit affirming a trial court decision issued by a federal district court.  I found the decision of more than just passing interest, inasmuch as the Ninth Circuit’s jurisdiction includes the lower federal courts in nine states, including Oregon.  Of further interest is that a recent case decided by the Oregon Supreme Court involving cab drivers in Portland under a similar arrangement as the drivers in Phoenix was decided in precisely the opposite way[2].

The Ninth Circuit’s ruling turned on what it described as the “economic reality” of the cab drivers’ working relationship with the cab company. The cab company exercised little control over how the drivers worked.  The drivers decided when and how often they worked, they purchased their own gas and car washes as well as arranged for substitute drivers when needed. The federal court concluded that under the “totality of the circumstances” the drivers weren’t economically dependent upon the cab company.  Thus, the drivers were not employees for purposes of the FLSA.

The Oregon Supreme Court case did not involve a claim for a minimum hourly wage by the drivers but, instead, a demand by Oregon’s Employment Department that the cab company pay the unemployment tax which state law requires of all employers.  The cab company, seeking to avoid imposition of the tax, sought to classify its drivers as independent contractors.  The Oregon court, however, held the drivers to be employees.  The result was to make the cab company liable for the tax.

Frankly, the Oregon court’s analysis seems a bit strained by comparison to the Ninth Circuit’s approach.  The court here avoids extended discussion of the cab drivers’ relationship to the company except to offer that in some way the drivers were providing services to the company in exchange for remuneration.  This conclusion on the court’s part proceeds from the fact that the cab company was issued a license by the city of Portland and was required by its license to serve customers in Portland. The fact that the cab drivers were paid for their services by their passengers was given scant lip service by the court.

A cynic might suggest that the Oregon court was simply protecting the state’s ability to collect revenue from the cab company in the form of employment taxes.  Maybe so.  In any event, it is difficult to square the two approaches to fact patterns which are quite similar.  Once again, we see how little predictability the law provides when courts come to different conclusions on the same basic facts.  We are left to resort to head scratching when asked to explain how courts can decide similar cases so differently.  At times, it seems, our most eloquent explanation can only be “it all depends”.

© 4/3/2017 Charles A. Ford of Hunt & Associates, P.C.  All rights reserved.

[1]  Iontchev v. AAA Cab Service, 2017 U.S. App. LEXIS 5326 (decision issued on March 27, 2017).

[2] Broadway Cab LLC v. Employment Dept, 358 Or 431 (2015).

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