Employment Law Daily Employment contract didn’t obligate employer to pay 'wages' to taxicab drivers
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Thursday, January 14, 2016

Employment contract didn’t obligate employer to pay 'wages' to taxicab drivers

By Ronald Miller, J.D. In view of the narrow definition of “wages” under the Illinois Wage Payment and Collection Act (IWPCA), a federal district court correctly found that an employer was not obligated to compensate its taxicab drivers under the terms of their employment contracts, ruled the Seventh Circuit. Because the drivers failed to show they were entitled to wages from the employer, their argument that it made improper deductions from wages by requiring them to pay fees and expenses failed as a matter of law (Enger v. Chicago Carriage Cab Corp., January 11, 2016, Flaum, J.). Shift fees and expenses. To drive one of the employer’s taxis, the Chicago drivers had to pay a daily or weekly “shift fee.” Essentially, shift fees are lease payments that allow a driver to operate a taxi and earn income. Drivers also had to pay operating expenses, including fuel, airport taxes, upkeep, and sometimes insurance payments. The drivers did not earn traditional wages or overtime pay—their only source of income was what they made in fares and tips from passengers. As a result, they claimed they often received less than minimum wage and for some shifts, paid more for fees and expenses than they received from fares and tips. The drivers filed this class action claiming the employer violated the IWPCA by improperly classifying them as independent contractors, failing to pay them the minimum wage or overtime pay, improperly charging them to work, and forcing them to bear their own operating expenses. They also asserted a cause of action based on a theory of unjust enrichment. The employer filed a motion to dismiss, arguing that the drivers could not recover under the IWPCA because they had not alleged the existence of an employment contract or any agreement to pay the drivers’ wages. The district court granted defendants’ motion to dismiss. Although the district court determined that the complaint adequately pleaded the existence of an implicit employment agreement between the parties, it concluded that the agreement did not require the employer to pay the drivers any wages, nor did it provide for overtime pay. This appeal ensued. IWPCA claims. On appeal, the drivers contended that the district court relied on an overly narrow definition of “wages” that improperly excluded tips and other forms of indirect compensation. The IWPCA provides employees with a cause of action against employers for the timely and complete payment of earned wages. The Act defines “wages” narrowly—a wage is compensation owed by the employer pursuant to an employment agreement between the parties. The Seventh Circuit agreed with the district court that the drivers’ IWPCA claims failed because they had not demonstrated that the employers’ owed them wages. It was undisputed that the parties’ employment agreement did not obligate the employer to compensate the drivers—it only required the company to make their cabs and medallions available to the drivers so that they could collect tips and fares from passengers. In fact, the drivers admitted in their complaint that they received no wages, and that their source of income was from fares and tips. Moreover, the drivers cited no case interpreting the IWPCA as including indirect compensation in its narrow definition of “wages.” By contrast, the Illinois Minimum Wage Law, which sets the minimum hourly rate that an employee must be paid regardless of the underlying employment agreement, defines “wages” broadly to include “compensation due to an employee by reason of his employment, including allowances … for gratuities … .” Thus, it was evident that the legislature had the ability to define “wages” so as to encompass indirect forms of compensation in the state’s wage laws. Because the taxicab company did not pay the drivers’ wages, they could not sue it for taking deductions from those non-existent wages.

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