Callahan v. City of Chicago, 813 F.3d 658

Background

Melissa Callahán leased taxis and medallions in Chicago (2009–2011); she provided labor, skill, and a chauffeur’s license but owned no cab or medallion.
Callahán alleges her net earnings (fares/tips minus leases and gas) averaged below federal and Illinois minimum wages.
She sued the City of Chicago advancing two theories: a regulatory takings claim (fares caps confiscatory) and an FLSA/Illinois minimum-wage claim that the City is her employer because it permits and regulates taxi operations.
District Court dismissed the takings claim under Rule 12(b)(6) and later, on summary judgment, rejected the wage claim because Chicago was not Callahán’s employer.
The Seventh Circuit affirmed: no compensable regulatory taking for Callahán (she owns no regulated asset), and the City is not her employer under the FLSA despite extensive regulation.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Regulatory takings: Do Chicago fare and lease-rate caps constitute a taking requiring compensation?	City rate caps reduce driver earnings and confiscate value; compensation required.	Callahán owns no regulated property (no medallion/cab); rate caps affect owners, not leased drivers.	No taking as to Callahán — she has no property interest whose value was confiscated.
Whether Chicago is an "employer" under the FLSA (29 U.S.C. §203(g)) because it permits and regulates taxi driving	Chicago "suffers or permits" drivers to work by regulating fares and the taxi system, so it must pay minimum wages.	City is a regulator, not an employer; treating every regulator as employer would collapse public/private distinction and exceed FLSA scope.	City is not the employer; regulation/permission to operate does not alone create FLSA employment.
Scope/utility of Lauritzen factors: Should the court apply the seven-factor test to label the City an employer?	Lauritzen factors can show employer status here given regulation and public importance of taxis.	Lauritzen addresses contractor/employee relations in private employment contexts; not apt to convert regulators into employers.	Court declines to extend Lauritzen to make government an employer simply because it extensively regulates.
Broader consequences of ruling: Would recognizing City as employer make many private actors public employees or state actors?	Implicitly argues taxis are unique (common carriers) and thus limited effect.	Recognizing the claim would make many regulated private workers public employees and state actors, producing untenable constitutional consequences.	Rejection: holding would improperly blur public/private employment and state-action doctrines.

Key Cases Cited

Williamson County Regional Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172 (takings claims usually directed to state inverse-condemnation procedures)
Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (regulatory-takings standard where regulation deprives all economically beneficial use)
Horne v. Department of Agriculture, 135 S. Ct. 2419 (takings jurisprudence addressing regulatory burdens on property)
Jackson v. Metropolitan Edison Co., 419 U.S. 345 (extensive regulation does not, by itself, make a private actor a state actor)
Flagg Bros., Inc. v. Brooks, 436 U.S. 149 (commercial regulation does not convert private parties into state actors)
Rendell-Baker v. Kohn, 457 U.S. 830 (extensive regulation and public funding are insufficient to make a private entity a state actor)
Secretary of Labor v. Lauritzen, 835 F.2d 1529 (Seventh Circuit factors for distinguishing employees from independent contractors)
Sorrentino v. Godinez, 777 F.3d 410 (federal jurisdiction over takings claims when state law provides no compensation for regulatory takings)