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Razak v. Uber Technologies, Inc.

United States District Court, E.D. Pennsylvania

September 13, 2017

ALI RAZAK, KENAN SABANI, KHALDOUN CHERDOUD
v.
UBER TECHNOLOGIES, INC., GEGAN, LLC

          MEMORANDUM RE: DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT

          Baylson, J.

         I. INTRODUCTION

         If apps be the food of the future, log on!

         With apologies to Shakespeare--the opening line of Twelfth Night, “If music be the food of love, play on” providing inspiration--app based ride-sharing is a disruptive business model in search of a legal theory.[1] The courts that have dealt with litigation arising out of ride-sharing technology have struggled to find an appropriate legal doctrine to fit these novel commercial relationships. For this case, one challenge is determining what type of activity includes a driver being “on call” for an assignment, and whether this status is “compensable.” Plaintiffs Ali Razak (“Razak”), Kenan Sabani (“Sabani”), and Khaldoun Cherdoud (“Cherdoud” and, together with Razak and Sabani, “Plaintiffs”) have brought individual and representative claims against Gegen, LLC and its sole member, Uber Technologies, Inc. (collectively, “Uber”) for violations of the federal minimum wage and overtime requirements under the Fair Labor Standards Act, 29 § U.S.C. 201 et seq. (“FLSA”), and parallel Pennsylvania state wage and labor laws. Before the Court is Uber's Motion for Partial Summary Judgment (ECF 66, “Uber Mot.”) on the limited question of whether-assuming, for purposes of this Motion only, that Plaintiffs qualify as “employees” and Uber as an “employer” under the FLSA[2]-the time they spent Online the Uber App is compensable work time under the FLSA, and by extension, the PMWA.[3]

         As the Court has noted throughout this case, Plaintiffs' claims advocate for a novel application of the FLSA, particularly its requirements with respect to time spent “on call.” Critically, while the FLSA's extension to “on call” time has heretofore been applied only to traditional, scheduled shift work, Plaintiffs here ask for its application in the context of the new “gig economy, ” as Plaintiffs refer to it, where individuals, such as Plaintiffs, work in accordance with their own personal schedules. As explained more fully below, the Court decided to resolve this issue as a threshold matter, the subject of Uber's motion for partial summary judgment.

         For the following reasons, Uber's Motion for Partial Summary Judgment will be DENIED, without prejudice, and with leave to refile at the completion of discovery.

         II. PROCEDURAL HISTORY

         Plaintiffs commenced this action on January 6, 2016, by filing a Complaint in the Court of Common Pleas of Philadelphia County. (ECF 1, Ex. A). On February 4, 2016, Defendants removed the action to this court, citing federal question and diversity jurisdiction. (Id.)

         A. Prior Motion Practice

         On March 22, 2016, Uber moved for the first time to dismiss this case and compel arbitration, and, in a separate motion, to stay this action. (See ECF 15, 18). In those motions, Uber argued that an order issued by Judge Chen in the Northern District of California in related cases had “nullified” the arbitration provision in Uber's Service Agreement, thereby raising a “threshold question of arbitrability” that had to be decided by an arbitrator. Finding that Judge Chen's order had no such effect, this court concluded that Plaintiffs had complied with the arbitration opt-out procedures allowed by the Service Agreement. The Court denied both motions. (ECF 37); Razak v. Uber Techs., Inc., No. 16-cv-573, 2016 WL 3960556, at *1 (E.D. Pa. July 21, 2016).

         On August 19, 2016, Uber moved for Judgment on the Pleadings, (ECF 38), which, on October 7, 2016, this Court granted in part, and denied in part. See Razak, 2016 WL 5874822, at *1. Importantly, the Court found that Plaintiffs had alleged sufficient facts that they qualified as “employees” rather than “independent contractors, ” under the “economic realities” test, such that judgment on the pleadings was not warranted. Id. at *4-5. Accordingly, the Court permitted Plaintiffs' minimum wage claims to proceed as pled. The Court dismissed Plaintiffs' breach of fiduciary duty claim with prejudice, but Plaintiffs' FLSA and PMWA overtime claims without prejudice, and with leave to file an amended complaint. Plaintiffs then filed an Amended Complaint on October 13, 2016. (ECF 47, “Compl.”).

         On October 31, 2016, Uber moved to dismiss Plaintiffs' Amended Complaint in its entirety, as well as to strike certain portions of it (ECF 48). The Court denied the motion to dismiss. (ECF 54; Razak v. Uber Techs., Inc., No. 16-cv-573, 2016 WL 7241795, at *6 (E.D. Pa. Dec. 14, 2016)). Specifically, the Court found that Plaintiffs' allegations that they were Online the Uber App for more than 40 hours in a given week was sufficient-at the pleading stage-to state a claim for overtime pay under the FLSA.

         However, the Court further found that the question of whether Plaintiffs' time spent Online the Uber App was actually compensable work time, within the meaning of the FLSA, was “an important, potentially dispositive one in this case.” Id. Accordingly, “notwithstanding the Court's conclusion that Plaintiffs ha[d] sufficiently alleged FLSA overtime violations, ” the Court designated the issue of compensability of Plaintiffs' Online time for expedited discovery. Id.

         B. Uber's Instant Motion for Partial Summary Judgment

         After substantial discovery, including depositions of Plaintiffs and certain third parties, as well as other filings, Uber filed its Motion for Partial Summary Judgment on the limited issue of the compensability of Plaintiffs' Online time. While maintaining its position that Plaintiffs are independent contractors rather than employees, Uber moves on the basis that even assuming that Plaintiffs did qualify as “employees” under the FLSA, Plaintiffs' time spent Online the Uber App, during which they are not actually transporting riders, is not compensable time under the FLSA.

         Plaintiff filed a memorandum in opposition to Uber's Motion (ECF 68, “Pls.' Opp'n), to which they attached a statement of disputed facts (ECF 68-1). However, Plaintiffs' submission failed to comply with F.R.C.P. 56(c), as well as this Court's practice order, in that it failed to provide record citations to support many of their contentions about disputed facts. Accordingly, the Court entered an Order requiring Plaintiffs to supplement their prior filings to comport with the Federal Rules and this Court's practices. (ECF 79). In Plaintiffs' supplemental submission (ECF 80, “PSOF2”), they did include record citations which Plaintiffs claim support their contentions regarding disputed facts; however a close look at the underlying documents cited reveals that many of them do not create a genuine dispute of fact.[4] For instance, Plaintiffs rely significantly on Uber's written regulations, without any evidence that Plaintiffs themselves suffered any loss of compensation or other detriment on account of these regulations. Plaintiffs assert the following were disputed:

(1) Whether the Uber App limits Plaintiffs' ability to ignore, reject, and cancel UberBLACK requests (see PSOF2 ¶ 13).
Plaintiffs cite Uber regulations in support, which state, in pertinent part, Uber “reserves the right to immediately deactivate” drivers' access to the software and service in the event that they “refus[e] to fully complete a trip after acceptance of a trip request, as described in the Software License and Online Service Agreement, without waiver by the Uber or Uber.” (ECF 68-13, “Driver Addendum”).
(2) Whether too many rejected trips affect a driver's “acceptance rate, ” which, at a certain impermissibly low level, subjects drivers to termination or deactivation. (PSOF2 ¶¶ 41-44).
Plaintiffs cite Uber regulations in support, which state, in pertinent part, “[h]igh acceptance rates are a critical part of reliable, high quality service, but not accepting trip requests does not lead to permanent loss of your account. . . But not accepting dispatches causes delays and degrades the reliability of the system. If you don't want to accept trips, just log off. If you consistently decline trip requests, we will assume you do not want to accept more trips and you may be logged out of the app.” (ECF 68-6, “Uber Community Guidelines”).
(3) Whether drivers can immediately go back Online if they decline three consecutive trips and are automatically switched offline. (PSOF2 ¶¶ 16, 29).
Plaintiffs cite Uber regulations in support, which state, in pertinent part, “[w]hat lead to deactivation? We will deactivate any account or accounts (including permanently) associated with fraudulent activity, which may include . . . accepting trips without intention to complete.”). (ECF 68-8 at 9, “Driver Deactivation Policy”).
(4) Whether cancelling a ride after accepting it subjects drivers to deactivation. (PSOF2 ¶ 19).
Plaintiffs again cite portions of Uber's Driver Addendum and Driver Deactivation Policy in support.
(5) Whether drivers' accounts may be suspended or terminated if their “cancellation rate” gets above a certain acceptable level. (PSOF2 ¶ 19).
Plaintiffs cite Uber's Driver Deactivation Policy in support, which states, in pertinent part, “[e]ach city has a maximum cancellation rate, based on the average cancellation rate of the drivers in that area. We will alert you multiple times if your cancellation rate is much higher than other drivers in your city, after which you may not be able to go online for a short period of time. If your cancellation rate continues to exceed the maximum limit, you may be deactivated.” (ECF 68-8 at 7-8).

         Since Plaintiffs failed to show that any of these issues affected them, the Court cannot accept these as “genuine” or as “material” to this case. In addition to the above examples in which Plaintiffs fail to cite record evidence that creates genuine disputes of fact, Uber more fully documented other deficiencies in its response to Plaintiffs' supplemental submission (ECF 85).

         On September 6, 2017, the Court held Oral Argument on Uber's partial motion for summary judgment, at which the Court posed a number of questions to counsel regarding the compensability issue, to determine which facts in the record truly are or are not disputed. (See Transcript of 9/6 Oral Argument “Tr.”). The Court will set forth below a summary of the undisputed facts in the record and developed further at Oral Argument, as they are relevant both to the issue of compensability, and to the issue of whether Plaintiffs are employees or independent contractors, which will be decided promptly after a short extension for any relevant discovery.

         III. UNDISPUTED FACTS

         The following is a fair account of the factual assertions at issue in this case, as taken from, inter alia, Uber's Statement of Undisputed Facts (ECF 66-3), and not genuinely disputed by Plaintiffs.

         A. Functionality of UberBLACK Platform

         Plaintiffs are Pennsylvania drivers participating in the Uber ride-sharing service who bring this action on behalf of a putative class of “[a]ll persons who provided limousine services, now known as UberBLACK, through Defendants' App in Philadelphia, Pennsylvania.” (Compl. ¶ 106). Uber furnishes a mobile smartphone application (the “Uber App”) “providing on-demand car services to the general public.” (Id. ¶ 22). Gegen is a wholly-owned subsidiary of Uber that holds a certificate of public convenience from (and is licensed by) the Philadelphia Parking Authority (“PPA”) to operate a limousine company. (ECF 66-3 Uber's Statement of Undisputed Facts (“SOF”) ¶ 3; ECF 68-1, Plaintiffs' Statement of Disputed or Undisputed Facts (“PSOF”) ¶ 3). Plaintiffs are certified limousine drivers who provide services as drivers through the Uber App's UberBLACK platform. (Compl. ¶¶ 2, 59). To access the Uber App, drivers open the App on their mobile device and log in using their usernames and passwords. (SOF ¶ 14). While being logged on permits drivers to, inter alia, check their account status, drivers are not eligible to receive trip requests from UberBLACK riders (“riders”) simply by virtue of being logged on. Many drivers, in fact, remain logged on 24 hours per day. (Tr. at 5).

         After logging on, to be eligible to receive a trip request from a prospective rider, drivers must tap a button to go online (“Online”). (Id. ¶ 15). Absent connectivity issues, there is nothing else drivers need to do, other than go Online, to receive trip requests. (Id. ¶ 16). When a trip request comes in, absent connectivity issues, the driver's phone will beep and the screen will flash. (Id. ¶ 20). When a trip request appears on the driver's mobile device, the rider's (1) name, (2) star rating, and (3) pickup location will appear, along with (4) any surge fare in effect, (5) the time that the rider requested UberBLACK, UberX (a lower cost Uber “product”), or any other Uber product, providing the ride, and (6) the estimated amount of time for the driver to reach the rider. (Id. ¶ 21).

         The rider's destination, however, is not provided until the driver indicates that the trip has begun (which could be before the rider actually enters the driver's vehicle). (PSOF ¶ 21; Tr. at 23, 29). According to Uber's regulations, the rider's destination is not provided until that time to prevent any potential discrimination by a driver who, for instance, may not want to travel to certain neighborhoods. (Tr. at 24)

         B. How UberBLACK Drivers get Paid

         While Uber sets the financial terms of all UberBLACK fares, and riders have their credit cards linked to the Uber App, the payment structure is such that riders pay an independent transportation carrier-either a limousine company or individual driver-licensed by the PPA. After the ride is completed, the carrier pays Uber a fee. The carrier then pays the driver his compensation. The driver's compensation is calculated based on some combination of factors, including, but not limited to, the time spent driving, the distance traveled, and the rider demand at the time of the trip. (Tr. at 18-20).

         C. Accepting or Rejecting Trips

         If a driver chooses to accept a trip request, the driver taps “accept.” (SOF ¶ 25). If a driver does not press the “accept” button within 15 seconds of the trip request, it will be deemed rejected by the driver by default. The Uber App will then automatically route the trip request to the next closest driver, until a driver accepts the request. If, however, no other driver accepts the trip, the trip request goes unfulfilled, as Uber cannot require any driver to accept a trip. (SOF ¶ 26; 28).

         Drivers are free to reject trip requests for any reason. (Id. ¶¶ 22, 24, 50-51). If a driver ignores three trip requests in a row, however, the Uber App will automatically move the driver from Online to offline, such that he will not be eligible at that time to accept trip requests. (SOF ¶ 29). Uber refers to this as a system integrity measure since, as described above, a trip request is sent to only one Uber driver at any given time, and having drivers who do not intend to give rides Online slows down the process of connecting riders and drivers, and leads to a poorer user experience for riders. Drivers who have been automatically transitioned offline, however, may go back Online at any point, including immediately after going offline, if they wish to do so. (Id. 30).

         Uber also has regulations under which it reserves the right to penalize drivers for not accepting rides. As one example, the driver may have an “acceptance rate” that is deemed unsatisfactory. However, there is no dispute that Plaintiffs have not personally been penalized for their respective acceptance rates, or for failing to accept rides. This court has not been presented with evidence that, in practice, Uber imposed any consequences for drivers' acceptance rates.

         D. Cancelling Trips

         Drivers are free to cancel trips even after they have accepted them, which Plaintiffs testified they have done on numerous occasions. (SOF ¶ 41). A driver may cancel a trip after he has accepted it but before the rider enters the vehicle if, for instance, the driver calls the rider and asks the rider's destination, and the driver decides he does not want to travel there. Additionally, if the driver indicates on the Uber App that the trip has begun prematurely, he will see the rider's destination on the Uber App, and may choose to cancel it at that time.

         Uber has regulations under which it reserves the right to penalize drivers for cancelling trips, including if they have a “cancellation rate” that is deemed unsatisfactory. (SOF ¶ 43). However, there is no dispute that Plaintiffs never suffered any consequences for cancelling trips. This court has not been presented with any evidence that, in practice, Uber imposed any consequences for drivers' cancellation rates.

         E. Drivers' Physical Location

         Trip requests via the Uber App are automatically sent to the driver closest to the requesting rider. (SOF ¶ 35). For drivers registered with UberBLACK in Philadelphia, the requesting rider must be located within Philadelphia. (Tr. at 9). The driver, however, may be anywhere he chooses. If he is far away, and there are other available drivers in closer proximity to a given rider, however, the driver will be unlikely to receive trip requests. (Id. at 10). Drivers have no way of knowing, ...


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