Did Companies Violate State Law by Failing to Pay Taxi Drivers?

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By Christine Pulfrey

“You misclassified us and failed to pay us the wages we are owed under state law,” Zed, a spokesman for a group of city cab drivers, said to Owen, who represented the cab companies for which the drivers worked.

“We have done nothing to violate state law, and we owe you no more wages,” Owen replied.

FACTS: A group of Chicago taxicab drivers said that they had to pay fees of $100 to $125 a day or $500 to $800 a week to drive a company's cabs. The drivers also were to pay for operating costs, such as fuel, airport taxes, maintenance expenses and often insurance coverage.

The drivers said they received no wages for their work. The only income they said they received was from fares and tips. Additionally, they said they might pay more in fees and expenses on some shifts than they received from fares and tips.

The drivers regularly worked at least 12 hours a day, but they said they were not paid overtime wages because the cab companies considered them to be independent contractors, not employees.

Despite the drivers’ classification by the companies and owners as independent contractors, they said they were subject to extensive control, such as influence over their working conditions and the ability to temporarily or permanently prevent the drivers from working. The drivers depended on the companies and owners because the companies had city-issued permits known as medallions that were needed to operate sanctioned vehicles such as taxis. The drivers said, however, that they were not able to obtain the medallions independently.

The class of cab drivers filed a lawsuit against the cab companies they worked for and some owners of those companies.

The drivers claimed that they worked with the companies under unwritten agreements that violated the Illinois Wage Payment and Collection Act and that they were improperly classified as independent contractors. The drivers also claimed that they were not paid minimum wages or overtime and that they were charged to work and forced to bear their own operating expenses while using the company-owned taxis.

The drivers cited court decisions from Massachusetts and other jurisdictions to support their claims that the expenses and fees were unlawful wage deductions under the Illinois Wage Payment and Collection Act.

Cab drivers said the expenses and fees they to paid taxi companies were unlawful wage deductions.

The cab companies and owners said the cab drivers failed to claim that an agreement existed by which the companies and owners were obligated to pay the cab drivers.

ISSUE: Did the cab companies and owners violate state wage and hour laws?

DECISION: The drivers' unwritten agreements with the cab companies did not obligate the companies to pay them wages, a federal district court ruled, dismissing the drivers' Illinois Wage Payment and Collection Act claims against the Chicago cab companies and some owners.

The agreements let the drivers take all fares and tips and required them to pay fees to the companies in exchange for the right to operate company-owned taxis, the court said.

“Under the plain language of the statute, no ‘wages’ could have been owed” to the taxi drivers by the companies and owners “since there was no agreement” that provided for the drivers to be compensated by the companies and owners.

Finding that the agreements did not provide for wages, the court said the drivers could not show that the companies improperly deducted expenses like insurance, airport taxes and vehicle maintenance from contractually required compensation.

Unlike the Fair Labor Standards Act, the Illinois Wage Payment and Collection Act does not give workers a right to minimum wages and overtime pay, the court said.

Instead, the statute authorizes workers to sue for compensation owed to them under an employment contract, it said.

The court decisions from Massachusetts and other jurisdictions that were cited by the taxi cab drivers involved state laws that were substantively different from the Illinois statute, the federal district court said. For example, the Massachusetts Wage Act does not require that a cause of action for wage theft be based on an employment contract, the court said (Enger v. Chi. Carriage Cab Co., 2014 BL 365399, N.D. Ill., No. 1:14-cv-02117, 12/29/14).

POINTERS: Under the Illinois Wage Payment and Collection Act, “an employment agreement can be entirely implicit,” and “employers and employees can manifest their assent to conditions of employment by conduct alone,” the federal district court said.

Under this standard, the taxi drivers agreed, by conduct, even if not by formal contract, that they would pay the companies and owners for the right to drive the cabs and bear all operating expenses while accepting only fares and tips paid by customers as compensation, the court said.

However, they failed to substantiate a claim under the Illinois Wage Payment and Collection Act because the agreement did not provide for the payment of any wages to the drivers, the court said.

For more information, see PAG's “State Wage Payment Laws, Comparison Chart” chapter.

This analysis illustrates how courts resolve pay-related disputes. The names and dialogue are fictitious.