Mazhar Saleem v. Corporate Transportation Group, Ltd.
854 F.3d 131
| 2d Cir. | 2017Background
- Plaintiffs are black‑car drivers who owned or rented franchises affiliated with defendants (Franchisor Defendants and Corporate Transportation Group — CTG) and brought collective FLSA and NYLL claims for unpaid overtime; district court granted summary judgment for defendants, holding drivers were independent contractors and plaintiffs appealed.
- Franchises conferred use of a CTG dispatch base; agreements labeled drivers as independent contractors, required TLC licenses and compliance with Rulebooks, and allowed drivers to rent or purchase franchises with substantial upfront and operating costs.
- CTG operated the dispatch system, negotiated corporate client contracts, processed vouchers, and charged fees; CTG and franchisors shared facilities and administrative staff.
- Drivers kept most fare revenue (after processing/percentage fees), set their own schedules, could accept/decline jobs via an app, choose work zones, drive for competing bases, cultivate private clients, and sometimes picked up street hails.
- Many drivers made large capital investments (vehicle, licenses, insurance), reported themselves as independent contractors for tax purposes (1099s), and earned substantial income from multiple sources.
- The Second Circuit affirmed: viewing the Silk/"economic reality" factors in totality, drivers were in business for themselves and therefore independent contractors as a matter of law for FLSA purposes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether drivers are "employees" under the FLSA or independent contractors | Drivers argued CTG exercised sufficient control (client list, dispatch tech, rate negotiation, rule enforcement) to make them employees | Defendants argued drivers retained entrepreneurial control (schedules, multiple employers, investment, opportunity for profit/loss) and were therefore independent contractors | Held: Drivers are independent contractors as a matter of law; summary judgment for defendants affirmed |
| Relevance of franchise agreements' labels and 1099 tax treatment | Plaintiffs contended labels and forms are not controlling and substance matters | Defendants pointed to consistent contract terms, 1099s, and business deductions supporting contractor status | Held: Contract labels and tax treatment are relevant (but not dispositive) and here support independent contractor finding in the totality analysis |
| Impact of CTG’s control over dispatch, client relationships, and fees | Plaintiffs argued these controls demonstrate economic dependence and control sufficient for employee status | Defendants replied such controls did not govern when/where/how often drivers worked or their ability to work elsewhere | Held: CTG’s control over clients/fees did not overcome drivers’ independent managerial and scheduling control in the economic reality test |
| Whether Rulebook enforcement and security committees create sufficient control | Plaintiffs claimed discipline and sanctions show employer‑like control | Defendants noted committees were driver‑run, and discipline did not eliminate drivers’ business autonomy | Held: Rule enforcement did not change the economic reality; discipline was not sufficient to make drivers employees |
Key Cases Cited
- Silk v. United States, 331 U.S. 704 (Supreme Court 1947) (set out multi‑factor economic‑reality test for employee v. independent contractor)
- Rutherford Food Corp. v. McComb, 331 U.S. 722 (Supreme Court 1947) (economic reality and totality of the circumstances approach)
- Darden v. Nationwide Mut. Ins. Co., 503 U.S. 318 (Supreme Court 1992) (FLSA’s broad definition of "employee")
- Superior Care v. Brock, 840 F.2d 1054 (2d Cir. 1988) (adopting Silk factors and emphasizing totality of circumstances)
- Barfield v. N.Y.C. Health & Hosp. Corp., 537 F.3d 132 (2d Cir. 2008) (summary judgment standard and application of economic‑reality test)
- Zheng v. Liberty Apparel Co., 355 F.3d 61 (2d Cir. 2003) (definition of "employ" under FLSA and joint employer analysis)
- Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28 (Supreme Court 1961) ("economic reality" controls over formal labels)
- Dole v. Snell, 875 F.2d 810 (10th Cir. 1989) (analysis of capital investment and schedule control in contractor inquiry)
- Mr. W Fireworks, Inc. v. Brock, 814 F.2d 1042 (5th Cir. 1987) (piecework compensation and profit‑loss considerations in economic‑reality test)