Uber car. Photo: Jason Doiy/ALM

Uber limo drivers are not employees under the Fair Labor Standards Act, a federal judge has ruled, handing the ride share giant a win against drivers who sued the company for allegedly failing to meet minimum wage and overtime requirements.

U.S. District Judge Michael Baylson of the Eastern District of Pennsylvania ruled Wednesday that UberBLACK drivers are independent contractors, rather than actual employees of the ride share company, and granted Uber summary judgment dismissing the case. According to Baylson, the ruling in Razak v. Uber Technologies marks the first time a court has granted summary judgment on the issue under the FLSA.

Baylson's opinion focused on criteria enumerated in the U.S. Court of Appeals for the Third Circuit's 1985 ruling in Donovan v. DialAmerica Marketing for determining whether a worker is an employee under the FLSA, and found that most factors indicated Uber limo drivers are independent contractors.

For instance, he said the fact that drivers can hire subcontractors, are paid through their own businesses and are free to determine their own working hours indicated the drivers had significant control over their work, which weighed heavily in favor of finding that the drivers were independent contractors.

“Uber places no restrictions on drivers' ability to engage in personal activities while online, and plaintiffs here, in fact, engaged in a range of personal activities while online,” Baylson said. “The undisputed facts in the record reflect that, while online, plaintiffs, inter alia, accepted rides from private clients, slept, did personal errands, smoked cigarettes, took personal phone calls, rejected trips because they were tired, and conducted business for their independent transportation companies.”

The ruling comes as courts across the country are grappling with how to apply traditional business and legal concepts to the emerging gig economy.

Sacks Weston Diamond attorney Jeremy Abay, who represented the drivers, said he plans to appeal the decision to the Third Circuit, which positions the case for the nation's first circuit court opinion on the issue.

“We have consistently stated throughout this case that employment status is not an issue that is properly determined by summary judgment, and we expect the Third Circuit to agree with us,” he said. “Donovan remains the controlling case in the Third Circuit, and it was published in 1985, so we'll be curious to see if the Third Circuit alters or otherwise updates the Donovan test so it can be more aptly applied in gig economy cases.”

Matthew Hank of Littler Mendelson represented Uber. A spokesman for the company said in an emailed statement, “We are pleased with the decision.”

In Razak, the plaintiffs filed a prospective class action suit alleging Uber violated the FLSA overtime requirements and the minimum wage. The issue about whether the drivers are employees or independent contractors emerged as a central issue in the litigation.

Among other things, the drivers, who make themselves available to pick up riders through Uber's smartphone app, contended that the company exercised significant control over them each time they were signed into the ride-hailing app, such as kicking drivers off the app if they failed to accept a certain amount of rides, or deactivating drivers who fell below certain customer satisfaction ratings. But Baylson said that just because the company exercised some control did not mean the drivers were employees.

“Given the unique business model which transportation network companies, such as Uber, have created, and their applicability to UberBLACK drivers, the fact that Uber does exercise some control when UberBLACK drivers are online does not convert UberBLACK drivers into employees,” Baylson said. “The court likens this situation to a carpenter, or a plumber, who is engaged to complete a renovation project for a homeowner.”