• Governmental Regulations Do Not an Employee Make
  • March 2, 2016 | Author: Laurent Badoux
  • Law Firm: Greenberg Traurig, LLP - Phoenix Office
  • The Seventh Circuit recently affirmed the district court’s decision in Callahan v. City of Chicago, 75 F. Supp. 3d 791 (N.D. Ill. 2015). Callahan, a taxi driver in Chicago, brought suit in district court against the city, pursuant to the Fair Labor Standards Act (FLSA), arguing that the city’s extensive regulations of the taxi industry made her a de facto employee of the city, and that as its employee, the city was required to pay her minimum wage.

    The district court granted the city’s motion for summary judgment after an extensive analysis of the city’s control over the taxi industry—and ultimately this particular plaintiff’s manner of work—under the economic realities test. The Seventh Circuit three-judge panel did not require as much in affirming the dismissal of Callahan’s FLSA claims. By focusing on the bigger picture, the Seventh Circuit panel highlighted the endless and unintended consequences that a finding of employee status would have. The policy implications ultimately weighed heavily in favor of the city, regardless of whether taxi drivers were vital to the city, or that the city’s regulations amounted to significant control over taxi drivers’ work.

    The district court had found that two of the six factors of the economic realities test weighed in favor of finding employee status, including the nature and degree of control over Callahan’s work and the lack of skill required to be a taxi driver, while the others weighed in favor of the city. In the analysis of the “opportunity for profit or loss” factor, Callahan argued that while “in theory” she had an opportunity for profit or loss, it was not a meaningful one. In other words, because the city set the maximum rate she could charge passengers, the city had “significant control over her ability to increase her earnings.” The city’s response was that Callahan (like other taxi drivers) can best determine how “to maximize the number of people [she] transport[s]” by choosing the hours she drives and the areas she picks up passengers in, and how to best maximize the tips she receives from passengers. This exchange likely sounds familiar to attorneys dealing with the upswing in employee-independent contractor classification cases under the FLSA. In this case, the trial court found that Callahan lacked the opportunity to meaningfully increase her earnings.

    Yet, the Seventh Circuit panel took a broader approach and did not revisit the district court’s analysis. Calling Callahan’s claims “extravagant,” the court’s brief opinion stresses the need to take some distance to have a better perspective of the obvious limitations of the definition of an employee in the FLSA. Although the city does “suffer or permit [taxi drivers] to work” in the literal sense, and the city does exert significant control over its taxi drivers, the result of finding employee status in this case could not have been intended by the FLSA. This emphasis on the consequences and policy over the minutia of the economic realities test brings a refreshing big-picture approach that can provide guidance to courts hearing these industry-related FLSA cases.