Recently, courts in highly-publicized independent contractor misclassification cases in the transportation sector have issued determinations finding the workers to be employees.  However, a recent decision from the Southern District of New York demonstrates that there are independent contractor business models in the sector that will be upheld by the courts.  In Saleem v. Corporate Transportation Group. et al., 1:12-cv-08450-JMF (S.D.N.Y.), chauffeurs for a “black car” claimed they were not self-employed but rather were employees entitled to overtime under the under both the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”).

Judge Jesse M. Furman recently granted Defendants’ motion for summary judgment and dismissed their case.  He found that the chauffeurs were in fact correctly classified as independent contractors under both statutes, and therefore not subject to the wage requirements of the state and federal wage laws.   Judge Furman reached this conclusion in part based on his findings that the drivers:

  • Set their own schedule of work and could reject jobs at will;
  • Were free to—and frequently did—work for other car services and provide transportation to private customers;
  • Made numerous decisions that affected their overall profitability, such as whether to rent or buy a franchise, work for other car service companies, hire other drivers, and solicit private clients;
  • Exercised a significant degree of independent initiative and took affirmative steps in order to book jobs;
  • Classified themselves as independent contractors on their tax returns;
  • Received no benefits from Defendants;
  • Received no salary but only retained a percentage of the fares; and
  • Could terminate the franchise agreements at will.

Although this decision is encouraging, particularly for companies in the “black car” industry, it is important to remember that this determination, like all employment classification inquiries, is based on the specific facts of the case.   Businesses should conduct a self-assessment of their independent contractor models – ideally with the assistance of counsel and subject to privilege – to determine the risk of a challenge from their independent contractors or government agencies.