Black-car drivers in New York City are independent contractors, not employees, the US Court of Appeals for the Second District ruled last week. It upheld a lower court ruling for summary judgment against the drivers from 2014 despite an amicus brief filed by the US Department of Labor.

Plaintiffs in the class action lawsuit were drivers who owned or operated black-car franchises in New York City. Defendant was Corporate Transportation Group, which sold or rented franchises to individual drivers and provided administrative support including dispatching black cars to customers.

“The details of this case are less important than the message it sends: that proper classification is all the more important, because based on any number of factors, this case could have gone another direction and created significant liability for Corporate Transportation Group,” said Bryan Peña, senior VP of contingent workforce strategies at Staffing Industry Analysts. Contingent workforce managers need to leverage their compliance partners and be sure to implement appropriate controls, he advises.

In this lawsuit, drivers argued they were employees. In its brief, the Department of Labor backed the drivers, arguing they were employees subject to significant control and discipline, including essential aspects of their work.

“They had minimal ability to affect their earnings beyond working more hours, as defendants determined the fares for their services and how they could seek out work,” according to the Department of Labor’s brief. “Defendants’ investments in office space, 120 employees, and dispatching and information technology systems dwarfed a driver’s ‘investment’ in his or her car and franchise fee. The drivers possessed limited skills, exercised little, if any, managerial initiative, and worked for defendants for lengthy periods of time — up to 18 years. Finally, the drivers were integral to defendants’ business; indeed, they were its core workforce.”

The Court of Appeals noted that Corporate Transportation Group’s contract prohibited drivers from transporting the company’s customers without going through its billing system. The company also produced a rulebook that included rules such as forbidding the harassment of customers or submitting fraudulent vouchers.

However, the court upheld the finding the drivers were independent contractors based on the totality of circumstances.

“In sum, plaintiff black‐car drivers exercised their business acumen in choosing the manner and extent of their affiliation with [Corporate Transportation Group]; were able to work for rival black‐car services, cultivate their own clients, and pick up street hails; made substantial investments in their businesses; and determined when, where, and how regularly to work,” according to the court’s opinion. “They owned or operated enterprises which were flexible and adaptable to market conditions. In short, based on the record here, ‘[t]hese driver‐owners [were] small businessmen.’”

Among the facts, the court noted one driver earned $395,081 between 2006 and 2008 by driving for a rival firm. It also noted drivers picked up hailed rides off the street despite that practice being technically prohibited by their contract.

Drivers also had control over their work in that they could select different franchise agreements and had control over their own hours. It noted that drivers would go on vacation for weeks without notifying Corporate Transportation Group.

However, the court noted the ruling takes into the account totality of circumstances. An entity exerting a similar of level of control still might qualify as an employer in another case with different facts.

The case is Mazhar Saleem, et al. v. Corporate Transportation Group Ltd., et al.