Uber's Rocky Journey Through Pa. Trials Highlights Risks and Strategies for Managing Independent Contractors, The Legal Intelligencer

In an unusual ruling, Pennsylvania federal judge Michael M. Baylson invoked a court’s inherent powers to manage its docket in dismissing with prejudice a long-running lawsuit against Uber Technologies, Inc. (Uber) but also awarded—after two hung juries—victory to Uber by granting its Rule 50(b) motion for judgement as a matter of law. See Razak v. Uber Technologies, No. CV 16-573, 2024 WL 3584324, *1 (E.D. Pa. July 30, 2024).

Plaintiffs attorneys vowed to appeal both of Uber’s victories. But according to Uber’s attorneys, dismissal was long overdue. After almost nine years of litigation, including Uber’s initial win on summary judgment, the U.S. Court of Appeals for the Third Circuit’s subsequent reversal, and two hung juries, the case needed to end before proceeding to a third jury trial. See Razak, 2024 WL 3584324 at *1; see memorandum of law in support of motion for judgement as a matter of law (Uber’s Rule 50 Memo), ECF 341-1 at p. 7, Razak v. Uber Technologies, 2:16CV00573 (E.D. Pa. July 1, 2024).

The case concerns whether UberBLACK drivers in Pennsylvania were properly classified as employees or independent contractors. This determination requires balancing the six “economic reality factors” that govern misclassification under the Federal Labor Standards Act (FLSA) and the Pennsylvania Minimum Wage Act (PMWA) and related ten factors that guide the same inquiry under the Pennsylvania Wage Payment and Collection Law (WPCL). Specifically, the six-factor and 10-factor tests are as follows:

• the degree of the alleged employer’s right to control the manner in which the work is to be performed;
• the alleged employee’s opportunity for profit or loss depending upon his managerial skill;
• the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;
• whether the service rendered requires a special skill;
• the degree of permanence of the working relationship; and
• whether the service rendered is an integral part of the alleged employer’s business.

See Donovan v. DialAmerica Marketing, 757 F.2d 1376, 1382 (3d Cir. 1985) (internal citations omitted).

• the control of the manner that work is to be done;
• responsibility for result only;
• terms of agreement between the parties;
• the nature of the work or occupation;
• the skill required for performance;
• whether one employed is engaged in a distinct occupation or business;
• which party supplies the tools;
• whether payment is by the time or by the job;
• whether the work is part of the regular business of the employer; and
• the right to terminate employment at any time.

See Williams v. Jani-King of Philadelphia, 837 F.3d 314, 321 (3d Cir. 2016) (internal citations omitted).

Under both tests, Uber expressed confidence that the drivers’ owning their vehicles, setting their hours, providing transportation services outside of Uber, and choosing their assignments should win the day. See, e.g., Uber’s Rule 50 Memo, ECF 341-1 at pp. 10-18, Razak v. Uber Technologies, 2:16CV00573 (E.D. Pa. July 1, 2024). Moreover, Uber is a technology company, not a driving company. The plaintiffs argued that Uber’s right to terminate drivers for specific infractions, control over the platform’s fee structure, and investment in the platform relative to drivers, coupled with drivers’ lack of specialized skills, importance to Uber’s business model, and relative permanence in working with Uber entitled the plaintiffs to win. See, e.g., Opp. to defendant’s Rule 50 Memo, ECF 349 at pp. 7-18, Razak (E.D. Pa. July 11, 2024).

Prior to the first trial, Uber successfully moved for summary judgement. But the plaintiffs appealed, and the Third Circuit ruled that there were too many factual disputes over control, opportunities for profit or loss, and the permanence of the working relationship to permit resolution without trial. Although Uber appealed, the Supreme Court declined the case. See Uber Technologies v. Razak, 141 S. Ct. 2629 (2021).

Eventually, a jury heard the case. But the jury deadlocked, with a majority of the jurors siding with Uber. Both parties then unsuccessfully moved for judgement as a matter of law, and the case was scheduled for another trial.

At the second trial, the plaintiffs presented essentially the same case-in-chief. The defendants changed their strategy by highlighting local regulations to show that the “control” Uber allegedly exerted over drivers was caused by law, rather than Uber’s preferences. Despite this strategy, the second trial’s jurors also deadlocked.

Uber then moved for the court to dismiss the action with prejudice according to the court’s inherent authority to manage its docket, and both parties moved for judgment as a matter of law. Judge Baylson granted both of Uber’s motions.

Although administrative, prejudicial dismissals should only be used in “extreme circumstances,” the court noted that “no single litigant has the right to continuously monopolize a district court’s docket,” and a third trial would unduly burden the court, Uber, and the community.

Uber’s win on the merits was directly tied to its second-trial strategy. Considering five of the factors—right to control, opportunity for profit or loss, investment in equipment or materials, degree of permanence, and special skills—in light of those regulations, the court ruled in Uber’s favor.

While Uber has prevailed (pending appeal), this is a cautionary tale for companies which rely upon independent contractors. Independent contractor classifications carry benefits, but also risk attracting legal challenges. When independent contractors are retained, companies must not exercise undue control over their operations. Further, certain jurors may side with alleged independent contractors, even where more reasonable jurors do not. Companies should consult experienced counsel regarding independent contractor classifications and may also benefit from periodic reassessments.