Employment Law Daily Taxi driver stalls out with novel claim that Chicago is her employer due to its taxi regulation
Friday, February 19, 2016

Taxi driver stalls out with novel claim that Chicago is her employer due to its taxi regulation

By Dave Strausfeld, J.D. A taxi driver was unable to persuade the Seventh Circuit with her novel theory that the City of Chicago became her employer by virtue of its extensive taxi regulation and thus was responsible for making up the shortfall between her actual wages and the lawful minimum wage. Noting that she raised questions of first impression in any federal court, the court affirmed dismissal of her federal and state minimum-wage claims on summary judgment. Her constitutional takings claim also failed (Callahan v. City of Chicago, February 17, 2016, Easterbrook, F.). This case is best viewed against the backdrop of the competition presented by largely unregulated ride-sharing companies such as Uber and Lyft. Between 2009 and 2011, the taxi driver frequently drove a leased taxicab in Chicago. She alleged that her net proceeds from driving (fares and tips, minus lease fees and gasoline) averaged less than the minimum wages required under the FLSA and Illinois law, and she contended that the City of Chicago must make up the difference. Two theories. The taxi driver presented two theories. First, she claimed the city’s regulations, which set permissible taxi fares, were confiscatory. The court rejected her takings claim on the ground that she did not own any asset whose market value had been reduced by Chicago’s regulation of taxi fares; she did not own the cab but rather leased it, nor did she own a medallion representing the city’s permission to operate a taxi. This left her other theory: that the city’s regulation of taxi drivers was so extensive that Chicago must be treated as her employer and, as such, it had a duty to guarantee she received minimum wage. Definition of “employer.” On her theory that the city owed her minimum wage, the taxi driver asked the court to deem the city her employer under the seven factors discussed in Secretary of Labor v. Lauritzen, a Seventh Circuit decision involving agricultural laborers. Lauritzen designed its list of factors to help courts choose between characterizing migrant laborers as employees or as independent contractors. When a person compensates another for work done on his or her property (such as a farm), the court explained here, the FLSA’s definition of “employ” to include “suffer or permit to work” implies the existence of an employment relationship even when the workers set their own schedules and choose their own harvesting techniques. “Insuperable obstacle.” But Lauritzen’s seven factors did not require a finding that Chicago was the taxi driver’s employer. Although she may have driven on the city’s streets, Chicago did not “suffer or permit” her to be there. More broadly, the core question here was whether the existence of extensive regulation makes the government an employer of parties that it regulates. “Our answer to that question is ‘no,’” the court declared. “An insuperable obstacle” to the taxi driver’s suit against the city for minimum wage was “the fact that Chicago is not her employer.” More at stake. More than wages were at stake, the appeals court mused, because taxi drivers are not the only occupation that Chicago regulates in some manner. If workers in regulated occupations really are public employees, then they are state actors—with all that this implies. “No one could be fired in Chicago unless the City approved, after notice and an opportunity for a hearing.” In fact, “Newspaper editors could not edit reporters’ stories, because public employees cannot censor speech.” “A legal revolution.” At oral argument, the taxi driver’s attorney insisted that taxi drivers are different from other regulated occupations because taxis are common carriers and must take all comers. “That doesn’t do much to confine the scope of the argument,” the court emphasized, “because hotels, restaurants, trains, air carriers, and other places of public accommodation also must accept, without discrimination, all potential paying customers.” Ultimately, the taxi driver’s argument taken to its logical extreme implied “[a]bolishing the distinction between public and private employment,” which “would work a legal revolution.”

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