Tag: taxicab

Uber and Lyft Users Unite! City of Chicago Beats Back Cab Drivers’ Constitutional Challenge to City Ridesharing Ordinance

An association representing Chicago taxicab drivers recently lost their attempt to invalidate a City of Chicago ridesharing ordinance as unconstitutional.

The crux of the cab drivers claim in Illinois Transportation Trade Ass’n v. City of Chicago, was that a City ordinance governing Transportation Network Providers (TNPs) like Uber and Lyft was too mild and didn’t subject TNPs to the same level of government oversight as Chicago cab drivers; especially in the areas of licensing and fair rates. (For example, TNPs are free to set their own rates by private contracts; something taxicabs can’t do.)

The cab drivers argued the Ordinance’s less onerous TNP strictures made it hard if not impossible for the City cabs to compete with TNPs for consumer business.

The Seventh Circuit struck down all of the plaintiffs claims and in doing so, discussed the nature of constitutional challenges to statutes in the modern, ridesharing context.

Deprivation of Property Right Without Compensation

The Court rejected the plaintiffs’ first argument that allowing TNPs to enter the Chicago taxicab market deprived plaintiffs of a property interest without compensation.

Finding that a protected property right does not include the right to be free from competition, the Court noted the City wasn’t depriving the plaintiffs of tangible or intangible property.  All the Ordinance did was codify Chicago cab drivers’ exposure to a new form of competition – competition from ridesharing services like Uber and Lyft.

And since the right to be free from competition is not a legally valid property right, the plaintiffs’ misappropriation of property theory failed.  The Court wrote that to indulge the plaintiffs’ argument that it had a property right in eliminating transportation service competition would give taxi drivers an unfair monopoly on all commercial transportation.

Equal Protection Claim: Cab Drivers and TNPs Should Be Subject to the Same Regulations

Striking down the plaintiffs’ equal protection claims, the Court framed the issue as whether “regulatory differences between Chicago taxicabs and Chicago TNPs are arbitrary or defensible.”  It found the regulatory variations were indeed defensible.  In reaching this holding the Court focused on the salient differences between taxicabs and TNPs including their distinct business models and levels of driver oversight and screening, as well as stark differences in consumer accessibility: where riders can hail a cab on any street, TNP users must first sign up with the TNP and install an app on their smartphone to hire TNP drivers.

A Dog Differs From a Cat and a Taxi Differs from a TNP Like Uber

In the end, it was the blatant qualitative differences between cab service and TNPs that carried the day and sealed the fate of plaintiffs’ constitutional challenge to the Ordinance.  The Court found there were measurable differences between taxis and TNPs in the areas of business model, driver screening and rate-setting, among others, that justified the City’s different regulatory schemes.

The Court found that the watered-down (according to Plaintiffs, anyway) TNP Ordinance rightly recognized the glaring differences between taxis and TNPs and was rationally related to the City’s interest in fostering competition in commercial transportation business.

Afterwords:

This case presents an interesting application of established constitutional equal protection principles to a progressive electronic commerce context.

In the end the case turned on whether leveling the competitive playing field to the cab drivers’ liking by striking down the Ordinance resulted in stifled competition.  Since the Court said the answer to the question was “yes,” the taxi drivers’ constitutional challenge failed.

 

 

Cab Passenger Fares Aren’t “Wages” Under IL Wage Payment and Collection Act – 7th Circuit

The salient question considered by the Seventh Circuit in Enger v. Chicago Carriage Cab Corp., 2016 WL 106878 (7th Cir. 2016) was whether “wages” under the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (the “Act”) encompasses “indirect wages” – monies paid an employee by third parties (i.e. as opposed to money paid directly from an employer).

The answer: No, it does not.

The plaintiffs, current and former Chicago cab drivers over a ten-year time frame sued various cab companies alleging Wage Act violations and unjust enrichment.

The plaintiffs alleged the companies violated the Act by misclassifying them as independent contractors instead of employees. The plaintiffs argued that the cab companies requirement that the driver plaintiffs pay daily or weekly shift fees (basically, a lease payment giving the drivers the right to operate the cabs) and other operating expenses, the companies violated the Act.

Affirming the district court’s motion to dismiss, the Seventh Circuit gave a cramped construction to the term wages under the Act examined the content and reach of the Act as applied to claims that

The Act gives employees a cause of action for payment of earned wages. “Wages” is defined by the Act as compensation owed an employee by an employer pursuant to an employment contract.

While the Seventh Circuit agreed with the drivers that there was at least an implied contract between them and the cab companies, those companies did not pay wages to the drivers as the term is defined by the Act.

This was because there was no obligation for the cab company to pay anything to the driver. The cab driver-cab company relationship was a reciprocal one: the driver paid a license fee to the company and then collected fares and tips from passengers.  No money was paid directly from the company to the driver.

The Court found that for the Act to apply to the drivers claims, it would have to expand the statutory definition of wages to include “indirect compensation:” compensation from someone other than the employer. Since there was no published case law on this issue, the Seventh Circuit refused to expand the Act’s definition of wages to include non-employer payments.

For support, the Court noted that Illinois’ Minimum Wage Law specifically defines wages to include gratuities in addition to compensation owed a plaintiff by reason of his employment. Since the legislature could have broadened the Act’s wages definition to include indirect compensation (like tips, etc.) but chose not to, the Court limited wages under the Act to payments directly from an employer to employee.

The Court also rejected the drivers’ argument that they received wages under the Act since drivers are often paid by the cab company when a passenger pays a fare via credit card. In this credit card scenario, the court found that the cab company simply acted as an intermediary that facilitated the credit card transaction. The company did not assume role of wage paying employer just because its credit card processor was used to handle some passenger credit card payments.

The driver’s unjust enrichment claim – that the cab companies were unjustly enriched by the drivers’ shift fees – also fell short.  Since there was an implied contract between the drivers and cab companies, unjust enrichment didn’t apply since an express or implied contract negates an unjust enrichment claim.

Afterwords:

This case clarifies that recoverable wages under Illinois’ Wage Act must flow directly from an employer to an employee.  Payments from third-party sources (like cab passengers) aren’t covered by the Wage Act.

Enger also serves as latest in a long line of cases that emphasize that an unjust enrichment can’t co-exist with an express or implied (as was the case here) contract governs the parties’ relationship.