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Saleem v. Corporate Transportation Group, Ltd.

United States Court of Appeals, Second Circuit

April 12, 2017

Mazhar Saleem, Individually and on behalf of all others similarly situated, Jagjit Singh, Individually and on behalf of all others similarly situated, Anjum Ali, Malook Singh, Carlota Briones, Jairo Bautista, Jose Cabrera, Marlene Pinedo, Miriam Solorzano, Mohammad Mian, Mohammad Siddiqui, S. Pedro Duman, Rajan Kapoor, Wilman Martinez, Jose Solorzano, Luis A. Perez, Ranjit S. Bhullar, Luis M. Sanchez, Anwar Bhatti, Avneet Koura, Maher Maqsood, Atif Razaq, Bhavesh Shah, Khushwant Singh, Jamshed Choudhry, Aziz Urrehman, Hasan Khalbash, Peter Panzica, Robinson Mata, Hilario A. Sanchez, Mansor Ahmed Rana, Baudwin Kouri, Alexis S. Gacia-Alberto, Muhammad I. Choudhry, Ana M. Herra, Marisol Espinal, Walid Hameho, Alexander Schwallb, Eric Jarmon, Keith Daniel, Rafael Rijo, Babab Hafeez, Norman Levine, Mario Guerrero Batanta, Liang Hua Ma, William Martinez, Mohammed A. Musa, Kerry Bobb, Harjar Rahman, Elpidio Helena, Tamer Rashdan, Mena Michael, Felix L. Caraballo, Mark Shinder, John M. Hidalgo, Odishi, Inc., Kirk Hayden, Bartolome Rosario, Luis Vasquez, Irfan Shafi, Mohammad A. Siddiqui, Wade Quashie, Jimmy Chen, Jeff M. Gravesande, Edisson Barros, Andrzej Olechnowicz, Nick Wijesinghe, (Point to Point Car & Limo Inc.), Jack Golden, Firoz Ahmed, Paul Glibauskas, Felix A. Paulino, Juan De Los Santos, Chowdhury Anowar, Zong Rong Zhu, Mohammed Gazi Ali, Mei Yao Liu, Katelyn Santos, Jose Jaimes, Ibrahim Desooki, Dongsedg Yoo, Jorge Monaks, Malik Hussain, Marcos Mendez, Luis Aucapina, Anderson Gonzalez, Towon Stewart, Feras Issa, Lenkin Pantaleon, Edgar Aucapina, Celstino Montero, Mikhail Gerber, Zydan Elnahar, Dexter Pusey, Rangdeu Multani, Satnam Singh, Xiangbo Li, Huang Xiong Jie, Rafael A. Riso, Ismael Mejia, Kuldip Singh, Jan A. Kalda, Jeewan Sinah, Wilson A. Santos, Sohan Singh Gill, Euclides Pena, Lester C. Mcdonald, Norman Ho, Gennadi Petrovski, Satnam Singh, Zenxin Wang, Noble Young, Francois Fan-Fan, Muhammad I. Choudhry, Fabian Martinez, Konstantin Katz, Rafael Osoria, Nwala Gabriel, Jose M. Solorzano, Ubaldo De Los Santos, Harrikissoon Seejattan, Harjar Rahman, Adel Elkazaz, Pedro M. Piasencia, Khorshed Alam, Garnell Wrighten, Refat Bhuiyan, Leo K. Stewart, Jeff M. Gravesande, Ahmed Nisar, Danjit Singh, Humayun Kabir Hussain, Mohammed A. Musa, Harnek Singh Whar, Shashi Bhatia, Goginder Singh, Abdelilah Elkarhat, Maninder Singh, Jo Ginder-singh, Wilman Martinez, Harvinder Khamra, David A. Sanchez, Syed Firozuddin, Dariusz Rydzewski, Yasar Kahraman, Ali Gazi Mohammed, Ahmed M. Bakier, Onris De La Rosa, Harvinder S. Bhamra, Imtiaz H. Quereshi, Damir, Ahmed Ismail, Munish Kumar, Paul Gladkevitch, Tarlocman Pal Singh, (T.P), Adam Klag, Al Wong Zhang, Mustapha Rahmouwi, Mahammad Ali Siddique, Sheng Zhang Lu, Gustavo Garcia, Ashwin Kumar, Inderjit Singh, Man Cheng, Balwinder Singh, Jawaid Kayani, Sukhdev Singh, Fernando Avendano, Xiong Wei Mi, Mohammad Islam, Dongseog You, Taojochan Sihgh, Ratic Shivionov, Jagdish Kal, Gabriel Pizha, Anomwar I. Chowdhury, Samson Liau, Nestor Teran, Rajan Dodeja, Socrates Gregoriadis, Saad Attia, Anthony Khan, Ramon A. Almonte, Badlani Prakash, Juan A. Soto, Munjed Shabaneh, Jose Solore, Jose M.S., Roxana A. Zetino, Irfan Shafi, Arcelia Barros, Cheung Yeung, Point to Point Car & Limo, Inc., Vishamber Tukrel, Ying Tian Lei, Mikhail Zemko, Tahir Aziz, Wen Zhong Li, Ke Geng Shi, N. Wesesinghe, Christina Sanchez Montero, Kulyk Oleg, Ariel Restituyo, Shuhrat Khakberdiyer, Angel M. Gaya, Bayram Onbasi, Jorge Contreras, Juan C. Mogrovejo, Xun Li Fan, Sameh S. Basily, Jose Pinto, Ramadan S. Kenawi, Donavan James, Ibrahim Onbasi, Amanda Singh, Suleyman Issi, Wazir Mughal, Etienne Tchitchui, Diogenes Pion, Ijaz Mahboob, Pedro Pazmino, Jing Jing Wang, Azid Riaz, Gurmail Singh, Asand Fara, Lawrence Calliste, Guo Bao Xuam, Jeetu Multani, King Wah Yiu, Anjum Ali, Gurmail Singh, Ahmed Aljahmi, Buo Xuan Guo, American Car Limo Tours, Inc., Mohamed Abdelaal, Khemlhand Kalika, Munish Kumar, Shahidullah Dulal, Plaintiffs-Appellants,
v.
Corporate Transportation Group, Ltd., Corporate Transportation Group International, Corporate Transportation Group Worldwide, Inc., NYC 2- Way International, Ltd., Allstate Car & Limousine, Inc., Arista Car & Limousine, Ltd., TWR Car & Limousine Service, Ltd., Excelsior Car and Limousine, Inc., Hybrid Limo Express, Inc., Eduard Slinin, Galina Slinin, Defendants-Appellees.[*]

          Argued: February 5, 2016

         Plaintiffs-Appellants, black-car drivers in the greater New York City area affiliated with Defendants-Appellees, owners of black-car "base licenses" and related entities, appeal from the September 24, 2014 judgment of the United States District Court for the Southern District of New York (Furman, J.) granting Defendants' motion for summary judgment, rejecting Plaintiffs' claim that they are "employees, " rather than "independent contractors, " within the meaning of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. For the reasons stated below, we AFFIRM the judgment of the district court.

          Rachel M. Bien, Outten & Golden LLP, New York, N.Y. (Michael N. Litrownik, Michael J. Scimone, Outten & Golden LLP, New York, N.Y.; Stephen H. Kahn, Kahn Opton LLP, Fort Lee, N.J., on the brief), for Plaintiffs-Appellants.

          Evan J. Spelfogel, Epstein Becker & Green, P.C., New York, N.Y., (Samuel Estreicher, New York, N.Y., on the brief), for Defendants-Appellees.

          Jesse Zvi Grauman (M. Patricia Smith, Jennifer S. Brand, Paul L. Frieden, on the brief), U.S. Department of Labor, Office of the Solicitor, Washington, D.C., for Amicus Curiae the Secretary of Labor.

          Shannon Liss-Riordan, Lichten & Liss-Riordan, P.C.; Catherine K. Ruckelshaus, National Employment Law Project, New York, NY, for Amici Curiae The National Employment Law Project, National Employment Lawyers' Association, Legal Aid Society of New York, The Urban Justice Center, and Make the Road New York.

          Richard H. Dolan (Wayne I. Baden and Elizabeth Wolstein, on the brief), Schlam Stone & Dolan LLP, New York, N.Y., for Amicus Curiae Black Car Assistance Corporation.

          Steven G. Mintz, Jeffrey D. Pollack, Mintz & Gold LLP, New York, N.Y., for Amici Curiae Mark Malchikov, Pavel Borisov, Anton Sirouka, Alex Borden, Vleriy Vishin, Michael Baier, and Josef Nusenvaum.

          Warren Postman, U.S. Chamber Litigation Center, Inc., Washington, D.C., (Michael J. Gray, Brent D. Knight, Jones Day, Chicago, Ill., on the brief), for Amicus Curiae the Chamber of Commerce of the United States of America.

          Before: Leval, Livingston, and Carney, Circuit Judges.

          Debra Ann Livingston, Circuit Judge.

         Plaintiffs-Appellants ("Plaintiffs"), black-car drivers in the greater New York City area, brought this action in the United States District Court for the Southern District of New York, asserting claims against Defendants-Appellees ("Defendants"), owners of black-car "base licenses" and affiliated entities, pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., and the New York State Labor Law ("NYLL"), N.Y. Lab. Law § 650 et seq., for, inter alia, unpaid overtime. The district court (Furman, Judge), after conditionally certifying a collective action under the FLSA, granted Defendants' motion for summary judgment on both the FLSA and NYLL claims as to both the named and opt-in Plaintiffs, concluding that "as a matter of law, Plaintiffs are properly classified as independent contractors rather than employees" for purposes of both statutes. Saleem v. Corp. Transp. Grp., Ltd., 52 F.Supp.3d 526, 543, 545 (S.D.N.Y. 2014). We agree with the district court that, "even when the historical facts and the relevant factors are viewed in the light most favorable" to Plaintiffs, they constitute independent contractors for FLSA purposes as a matter of law.[1] Barfield v. N.Y.C. Health & Hosps. Corp., 537 F.3d 132, 144 (2d Cir. 2008). Accordingly, we affirm the judgment of the district court.

         Background

         I. Facts[2]

         Plaintiffs are black-car drivers in the tri-state area who owned or operated black-car franchises and were affiliated with Defendants.[3] Six Defendants (collectively, "Franchisor Defendants") each own a "base license" that allows them to operate a black-car dispatch base in New York City, and to sell franchises to individual drivers.[4] See 35 R.C.N.Y. § 59A-03(c). The remaining three Defendants are various incarnations of the "Corporate Transportation Group" (collectively, "CTG"), which provides administrative support for the operation of the Franchisor Defendants' dispatch bases (as well as for 126 other for-hire vehicle enterprises) by handling, inter alia, billing, referral, payment, bookkeeping, accounting, voucher processing, and dispatching.[5] The Franchisor Defendants and CTG operate out of a single facility in Brooklyn and constitute "a single integrated enterprise and/or joint employer for the purposes of the [FLSA]." Joint Appendix ["J.A."] 1317. Among the approximately 70 people employed in CTG's dispatch unit at the time relevant here, 40 were in billing, six or seven were in customer service, five were in driver relations, and at least two were in sales.[6] There were roughly 700 black cars affiliated with the Franchisor Defendants' dispatch bases and operating under the CTG umbrella. CTG's clients were primarily corporate entities, such as Deutsche Bank and Bank of America.

         The named Plaintiffs rented or purchased their franchises directly from the Franchisor Defendants or, in some cases, from other franchisees.[7] Plaintiffs who rented franchises paid $130 to $150 per week, while Plaintiffs who purchased their franchises directly from a Franchisor Defendant did so pursuant to franchise agreements, which required them to pay franchise fees ranging from a nominal amount (or even nothing) to as much as $60, 000. The franchise agreements also required franchisees to pay additional fees, some upfront and some recurring, which varied from agreement to agreement. (For example, in exchange for a high upfront fee, "Platinum" franchises offered by certain Franchisor Defendants provided for a significantly lower voucher processing fee - the percentage of a fare charged to a driver for payment processing - than their free "Gold" franchises. See J.A. 743, 752.) Franchisees also had to obtain a New York City Taxi & Limousine Commission ("TLC") license, insurance, and a vehicle which they were responsible for maintaining.

         Plaintiffs' franchise agreements describe the nature of the relationship between franchisor and franchisee as follows:

Franchisee is not an employee or agent of Franchisor, but merely a subscriber to the services offered by Franchisor. Franchisee shall at all times be free from the control or direction of Franchisor in the operation of Franchisee's business, and Franchisor shall not control, supervise or direct the services to be performed by Franchisee.

J.A. 732. Each franchise agreement also contains a "non-compete" provision which prohibited CTG-affiliated drivers from driving CTG customers "without processing payment for such services through CTG." J.A. 3477-79. Failure to comply with this and other terms was grounds for termination of the franchise. Significantly, however, the franchise agreements did not prohibit drivers from transporting non-CTG customers for a competitor black-car company, or independently, during their affiliation with CTG.[8]

         The franchise agreements also required that drivers comply with "Rulebooks" - manuals setting out certain standards of conduct - specific to each Franchisor Defendant.[9] The Rulebooks forbid, for instance, harassing customers or other drivers and submitting fraudulent vouchers. The Rulebooks also include a dress code, which required drivers to dress neatly in specified business attire, as well as guidelines for keeping vehicles clean. Drivers were not required to wear a uniform, however, or to mark their cars with insignia denoting an affiliation with the Defendants.

         The Rulebooks were enforced by each Franchisor Defendant's Security Committee, each of which was composed entirely of drivers who served elected terms. Security Committees could hold hearings on complaints and suspected violations. If a Security Committee determined that a driver had broken a rule, it could impose a monetary penalty on the driver, temporarily suspend the driver, or even terminate the driver's franchise agreement. Although it is undisputed that drivers elected the members of the Security Committees, the parties dispute whether CTG exercised influence over the Committees.

         During their affiliation with the Defendants, Plaintiffs, like other drivers in the CTG network, possessed considerable autonomy in their day-to-day affairs. Drivers could, for example, choose among three principal ways of securing fares for driving CTG customers. First, they could wait in a physical queue of cars outside certain high-volume CTG clients' businesses. Second, they could elect to drive under a CTG contract with the New York City Metropolitan Transport Authority ("MTA"), transporting by prearrangement clients who were unable to travel via public transportation.[10] Third, drivers could access CTG's proprietary black-car dispatch system, through which CTG transmitted requests for service from servers in a dispatch room to an application ("app") on drivers' smart phones.[11] In all three cases, clients provided vouchers to the driver transporting them in lieu of cash payment, and these vouchers were thereafter processed by CTG.

         Drivers also determined when and how often to drive, and the record reflects that they worked vastly different amounts of time, without providing any notice to Defendants.[12] Plaintiffs likewise chose which area in which to work, and they were at liberty to - and did - accept or decline jobs that were offered.[13] Significantly, Plaintiffs also could - and did - drive for dispatch bases other than the one with which they were affiliated, and they were thus free to shift as they chose during the workday from one dispatch service to another. Most of the named Plaintiffs drove for other black-car companies regularly, and some earned substantial sums as a result.[14] Some drivers also transported - and were paid directly by - customers with whom they had made individual arrangements, and others, though it was contrary to TLC regulations, see 35 R.C.N.Y. § 59B-25(a), picked up street hails.[15]

         Although CTG negotiated rates with its clients, supplied the proprietary dispatch technology, and operated the dispatch system, the record suggests that Plaintiffs took home the majority - in some cases up to 85% - of each CTG fare, less some small additional fees. On this basis, Plaintiffs classified themselves as independent contractors on their tax returns and took substantial business deductions.

         II. Procedural History

         On November 19, 2012, Plaintiffs Mazhar Saleem and Jagjit Singh filed a complaint in district court, seeking to recover unpaid overtime and other wages under the FLSA and the NYLL on behalf of a class of similarly situated drivers. On June 17, 2013, the district court conditionally certified a collective action pursuant to Section 216(b) of the FLSA, 29 U.S.C. § 216(b), and approved a notice to be sent to potential opt-in plaintiffs. The court subsequently denied class certification of their NYLL claims, a determination not before us on appeal. Saleem v. Corp. Transp. Grp., Ltd., No. 12 Civ. 8450(JMF), 2013 WL 6061340, at *7 (S.D.N.Y. Nov. 15, 2013).

         On September 16, 2014, Judge Furman granted Defendants' motion for summary judgment and denied Plaintiffs' motion for partial summary judgment as to both the named Plaintiffs and those Plaintiffs who had opted into the collective action. Saleem, 52 F.Supp.3d at 545. In concluding that Defendants were entitled to summary judgment because Plaintiffs were not, as a matter of law, employees of Defendants for FLSA purposes, the district court applied the five factors enumerated by this Court in Brock v. Superior Care, Inc., 840 F.2d 1054, 1058-59 (2d Cir. 1988), analyzing each factor individually and considering whether the "totality of the circumstances" suggested that Plaintiffs were "employees" or "independent contractors, " Saleem, 52 F.Supp.3d at 535-36, 544. The district court concluded that "[n]otwithstanding that the final [Superior Care] factor, " the degree to which employees are integral to a business, "favors employment status, " "[w]eighing all of the [Superior Care] factors and considering the totality of the circumstances, " "the drivers here fall into the [independent contractor] category as a matter of law."[16] Id.

         On January 6, 2015, Plaintiffs timely appealed.

         Discussion

         I.

         We review the district court's grant of summary judgment de novo, and we will affirm only if the evidence, when viewed in the light most favorable to the party against whom it was entered, demonstrates that there is no genuine issue as to any material fact and that judgment was warranted as a matter of law. Barfield, 537 F.3d at 140; see also Delaney v. Bank of Am. Corp., 766 F.3d 163, 167 (2d Cir. 2014). Here, we examine the district court's conclusion that, "as a matter of law, Plaintiffs are properly classified as independent contractors rather than employees for purposes of the FLSA." Saleem, 52 F.Supp.3d at 543. We begin, then, with a brief explication of our case law, as is relevant to this distinction.

         The FLSA defines an "employee" as "any individual employed by an employer." 29 U.S.C. § 203(e)(1). "An entity 'employs' an individual under the FLSA" if it "'suffer[s] or permit[s] that individual to work.'"[17] Zheng v. Liberty Apparel Co., 355 F.3d 61, 66 (2d Cir. 2003) (alterations in original) (quoting 29 U.S.C. § 203(g)); see also 29 U.S.C. § 203(d) (defining "employer" as "any person acting directly or indirectly in the interest of any employer in relation to an employee"). In light of the definition's circularity, courts have endeavored to distinguish between employees and independent contractors based on factors crafted to shed light on the underlying economic reality of the relationship.[18] As the district court recognized, this Court has focused on "the totality of the circumstances" in addressing our "ultimate concern . . . whether, as a matter of economic reality, the workers depend upon someone else's business for the opportunity to render service or are in business for themselves." Superior Care, 840 F.2d at 1059; see also Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33 (1961) ("'[E]conomic reality' rather than 'technical concepts' is to be the test of employment." (quoting United States v. Silk, 331 U.S. 704, 713 (1947))); Bartels v. Birmingham, 332 U.S. 126, 130 (1947) ("[E]mployees are those who as a matter of economic reality are dependent upon the business to which they render service.").

         Our case law has identified certain factors, first set out in Silk, 331 U.S. at 716, as relevant to separating employees from independent contractors in the context of the FLSA, [19] see Superior Care, 840 F.2d at 1058-59. Nevertheless, "[t]hese factors are merely aids to analysis, " Thibault v. Bellsouth Telecomms., Inc., 612 F.3d 843, 846 (5th Cir. 2010), and are helpful only insofar as they elucidate the "economic reality" of the arrangement at issue, Superior Care, 840 F.2d at 1059. Relevant FLSA precedent, despite endorsing the Silk factors, cautions against their "mechanical application." Id. As we stated in Barfield v. New York City Health & Hospitals Corp., 537 F.3d at 141, "[t]he determination of whether an employer-employee relationship exists for purposes of the FLSA should be grounded in 'economic reality rather than technical concepts, ' . . . determined by reference not to 'isolated factors but rather upon the circumstances of the whole activity, '" (citation omitted) (first quoting Goldberg, 366 U.S. at 33, and then quoting Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947)).[20] Thus, while the following discussion draws upon and discusses the Silk factors where relevant, it trains on the "ultimate question": the economic reality of Plaintiffs' relationship with CTG.

         II.

         Upon de novo review, "even when the historical facts and the relevant factors are viewed in the light most favorable" to Plaintiffs, id. at 144, and despite the broad sweep of the FLSA's definition of "employee, " Darden, 503 U.S. at 326, the record here does not permit the conclusion that Plaintiffs were employees, but instead establishes that they were in business for themselves. As discussed below, Plaintiffs independently determined (1) the manner and extent of their affiliation with CTG; (2) whether to work exclusively for CTG accounts or provide rides for CTG's rivals' clients and/or develop business of their own; (3) the degree to which they would invest in their driving businesses; and (4) when, where, and how regularly to provide rides for CTG clients. While none of these facts is determinative on its own, considered as a whole with the goal of discerning the underlying economic reality of the relationship here, the district court correctly determined that Plaintiffs are, as a matter of law, "properly classified as independent contractors rather than employees for purposes of the FLSA." Saleem, 52 F.Supp.3d at 543. As a result, Defendants were properly granted summary judgment.

         A. Affiliation with CTG

         From the start, Plaintiffs were "driver-owners" who made significant decisions regarding the operation of their small businesses. Silk, 331 U.S. at 719. Plaintiffs chose not only to enter into a franchise agreement with a CTG Franchisor Defendant instead of seeking more conventional employment, but also exercised considerable discretion in choosing the nature and parameters of that affiliation. Some Plaintiffs elected to purchase a franchise, either directly from a Franchisor Defendant or on the secondary market, while others opted to rent one. Further, because the franchise agreements contained different terms, and particularly because there was wide variation in both the price of the franchises and the fees associated with using them, Plaintiffs had to strike a balance between a franchise's upfront cost and the favorability of its terms, a choice which ultimately affected its profitability.

         The franchise agreements' termination provisions also are indicative of Plaintiffs' independence. While Plaintiffs could reassess their choice to affiliate with CTG (not to mention the nature of that affiliation) and "terminate the [franchise] agreements" as they pleased, [21] Saleem, 52 F.Supp.3d at 542, the terms of the agreements committed the Franchisor Defendants to maintaining them for substantial durations, or even indefinitely, absent Plaintiffs' breach of those terms. Because Plaintiffs were free to drive for competitors, for personal clients, or not at all without violating their franchise agreements, the termination provisions constituted a significant restriction on the ability of Franchisor Defendants to exercise control.

         In addition, each of Plaintiffs' agreements also designated them as independent contractors, and some Plaintiffs formed corporations to operate their franchises. "Though an employer's self-serving label of workers as independent contractors is not controlling, " Superior Care, 840 F.2d at 1059; see also Thibault, 612 F.3d at 845-46 (noting that "contractual designation of the worker as an independent contractor is not necessarily controlling" (emphasis added)), such a designation in the franchise agreement is pertinent to "the parties' beliefs about the nature of the relationship, " Estate of Suskovich v. Anthem Health Plans of Va., Inc., 553 F.3d 559, 564 (7th Cir. 2009); see also Johnson v. City of Saline, 151 F.3d 564, 568-69 (6th Cir. 1998) (observing, in ADA case, that "the contractual relationship reads unmistakably as one with an independent contractor as opposed to one with an employee").[22] Thus, in the language of the Silk factors, Plaintiffs demonstrated independence and initiative in selecting franchise agreements that best fit their business ...


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