McGillis v. Dept. of Economic Opportunity ( 2017 )


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  •        Third District Court of Appeal
    State of Florida
    Opinion filed February 1, 2017.
    Not final until disposition of timely filed motion for rehearing.
    ________________
    No. 3D15-2758
    Lower Tribunal No. 0026283468-02
    ________________
    Darrin E. McGillis,
    Appellant,
    vs.
    Department of Economic Opportunity; and Rasier LLC, d/b/a
    UBER,
    Appellees.
    An Appeal from the Department of Economic Opportunity.
    Darrin E. McGillis, in proper person.
    Shutts & Bowen LLP, and Daniel E. Nordby (Tallahassee), and Andrew E.
    Schwartz (Fort Lauderdale), for appellee Department of Economic Opportunity;
    Littler Mendelson, P.C., and Courtney B. Wilson, for appellee Rasier, LLC.
    Before LAGOA, SALTER, and LOGUE, JJ.
    LOGUE, J.
    Darrin E. McGillis, a former Uber driver, appeals the decision of the Florida
    Department of Economic Opportunity concluding that an Uber driver is not an
    employee for the purpose of reemployment assistance. Because the parties’ contract
    explicitly provides that an Uber driver is not an employee and the nature of the
    parties’ relationship was consistent with this classification, we agree. We therefore
    affirm the Department’s order denying McGillis’ claim for reemployment
    assistance.
    FACTS AND PROCEDURAL HISTORY
    Uber is a technology platform that connects drivers with paying customers
    seeking transportation services. McGillis served as an Uber driver until Uber
    revoked his access to the technology based on alleged violations of Uber’s user
    privacy policy. McGillis then filed a claim for reemployment assistance against
    Rasier LLC, d/b/a Uber. 1 The threshold issue raised by McGillis’ claim was whether
    he provided service to Uber as an employee entitled to reemployment assistance
    under section 443.1216, Florida Statutes (2015), or whether he served Uber as an
    independent contractor.
    The Department of Revenue initially found that McGillis served as an Uber
    employee. Uber contested this determination, and an evidentiary hearing was held
    1
    Rasier LLC is a wholly owned subsidiary of Uber Technologies, Inc., and holds a
    license to administer Uber Technologies’ software in Florida. For purposes of
    simplicity, we refer to both Uber Technologies and Rasier as “Uber.”
    2
    before the Department of Economic Opportunity. Following the hearing, a special
    deputy recommended a reversal of the Department’s order. The special deputy
    found McGillis had served Uber as an independent contractor and was therefore not
    entitled to reemployment assistance. McGillis filed exceptions to the recommended
    order.    In a detailed final order, the executive director of the Department of
    Economic Opportunity adopted the special deputy’s recommended order and
    overruled McGillis’ exceptions. McGillis filed this timely appeal.
    At the hearing before the Department, witnesses explained in detail how
    Uber’s transportation network software works.         The software consists of two
    applications that are generally accessible on smartphones: a “user application,” used
    by individuals seeking transportation services, and a “driver application,” used by
    individuals willing to provide transportation services. 2 Drivers receive a percentage
    of the fare charged to the passengers,3 and Uber processes payments to drivers
    weekly by direct deposit.
    Uber supplies additional insurance coverage for commercial operation of a
    vehicle, but it does not provide other benefits such as medical insurance, vacation
    2
    If a prospective driver does not own a smartphone, Uber may provide one to the
    driver with the driver application installed, but the driver is responsible for paying a
    deposit and a weekly fee.
    3
    The fare is based on an algorithm developed by Uber. Variables include a minimum
    base fare, charges for mileage and time spent in transit, and a multiplier based on
    supply and demand in a particular location at a particular time.
    3
    pay, or retirement pay. At the end of each year, Uber sends each driver a “Form
    1099”—an Internal Revenue Service form used to report payments to independent
    contractors—setting out the amounts paid to the driver for the year.
    A prospective Uber driver must agree to the terms and conditions of Uber’s
    “Software Sublicense and Online Agreement.” This contract specifies that the driver
    is an independent contractor and not an employee. It further explains that the driver,
    as an independent contractor, is not entitled to unemployment benefits:
    This Agreement is between two co-equal, independent business
    enterprises that are separately owned and operated. The Parties intend
    this Agreement to create the relationship of principal and independent
    contractor and not that of employer and employee. The Parties are not
    employees, agents, joint venturers or partners of each other for any
    purpose. As an independent contractor, you recognize that you are not
    entitled to unemployment benefits following termination of the Parties’
    relationship.
    The contract further specifies that each trip request accepted is considered a
    “separate contractual engagement,” that drivers are “entitled to accept, reject, and
    select” requests as they see fit, and that drivers have no obligation to accept any
    request.4 Drivers are free to set their own schedules and to determine what locations
    they will serve.
    4
    Uber may deactivate the driver’s account if the driver’s acceptance rate is
    persistently below a specified level or after 180 consecutive days of inactivity. But
    even if deactivated, the driver may request reactivation of the account and return to
    using the driver application.
    4
    A prospective driver is subject to a background check and must provide Uber
    with information about the driver’s vehicle, registration, license, and insurance.
    Drivers are responsible for supplying, maintaining, and fueling their own vehicles.
    Uber does not require drivers to display Uber signage in their vehicles, nor does
    Uber control the drivers’ attire. Drivers are free to switch between using Uber’s
    driver application and the application of a competitor, such as Lyft.
    Uber does not directly evaluate or supervise its drivers. Instead, passengers
    rate their drivers on a scale ranging from one to five stars. If a driver’s overall rating
    falls below the level set by the region’s general manager and no improvement is
    shown, Uber may deactivate the driver’s account. 5
    During his time as an Uber driver, McGillis experimented with when and
    where to use the driver application. He spent his own time and money investigating
    the most profitable times and locations. Uber did not reimburse him for any costs
    related to this market research, such as the cost of gas. And although McGillis left
    his previous job to use Uber’s driver application, Uber did not require him to do so.
    Nor did Uber prohibit him from receiving ride requests from Lyft’s driver
    application. In fact, McGillis switched between using Uber and Lyft at his discretion.
    5
    Drivers also rate passengers on a similar scale. This score can affect a passenger’s
    average rating, which drivers can view before accepting or rejecting a trip request.
    5
    Based on the testimony presented at the hearing, the Department’s executive
    director concluded that Uber drivers were not employees. It noted that the drivers
    exercise a level of free agency and control over their work different from that of the
    traditional master-and-servant model indicative of an employer-employee
    relationship:
    The agreement between drivers and Uber specifies that the relationship
    is one of independent contractor, and the actual course of dealing
    confirms that characterization. Drivers have significant control over the
    details of their work. Drivers use their own vehicles and choose when,
    if ever, to provide services through Uber’s software. Drivers decide
    where to work. Drivers decide which customers to serve. Drivers have
    control over many details of the customer experience. Drivers may
    provide services through, or work for, competing platforms or other
    companies when not using the Uber application. On these facts, it
    appears that Uber operates not as employer, but as a middleman or
    broker for transportation services.
    Rasier, LLC v. Fla. Dept. Econ. Opportunity, 0026 2834 68-02 McGillis (Fla. Dept.
    Econ. Opp. Dec. 3, 2015) at 2.
    ANALYSIS
    At the outset, we approve the executive director’s observation regarding the
    changes rippling through our society as a result of the technology at issue:
    The internet and the smartphones that can now access it are
    transformative tools, and creative entrepreneurs are finding new uses
    for them every day. People are being connected in ways undreamed of
    just a decade ago. This is as true for business relationships (through
    software like Uber) as it is for social relationships (through software
    like Facebook). Many more people have access to, and voice in,
    markets that may once have been closed or restricted. Just as many
    more people can now publish their own thoughts to a vast audience,
    6
    many more people can now offer their services or hawk their wares to
    a vast consumer base.
    
    Id. at 19.
    In this case, we must decide whether a multi-faceted product of new
    technology should be fixed into either the old square hole or the old round hole of
    existing legal categories, when neither is a perfect fit.
    The narrow issue on appeal is whether McGillis performed transportation
    services using Uber’s software application as an “employee” within the meaning of
    Chapter 443. This determination is based on “the usual common-law rules applicable
    in determining the employer-employee relationship.” § 443.1216(1)(a)(2). “The
    statute does not refer to other rules or factors for determining the employment
    relationship.” Brayshaw v. Agency for Work Force Innovation, 
    58 So. 3d 301
    , 302
    (Fla. 1st DCA 2011). Accordingly, the Department was “limited to applying only
    Florida common law in determining the nature of the employment relationship.” Id.6
    6
    An administrative agency’s interpretation of a statute it is charged with enforcing
    is generally entitled to great deference. Donato v. Am. Tel. & Tel. Co., 
    767 So. 2d 1146
    , 1153 (Fla. 2000); Metro. Dade Cty. v. P.J. Birds, Inc., 
    654 So. 2d 170
    , 175
    (Fla. 3d DCA 1995). Under this doctrine, courts defer to the agency because “the
    interpretation may have been based on a history that is best known by the agency or
    special expertise the agency has in applying the statute.” Brown v. State, Comm’n
    on Ethics, 
    969 So. 2d 553
    , 557 (Fla. 1st DCA 2007). Deference is not required,
    however, if the agency’s interpretation conflicts with the statute’s plain meaning or
    requires no special agency expertise. Arza v. Fla. Elections Comm’n, 
    907 So. 2d 604
    , 606 (Fla. 3d DCA 2005).
    7
    To determine whether an individual is an employee or independent contractor,
    Florida law requires courts to initially look to the parties’ agreement. Keith v. News
    & Sun Sentinel Co., 
    667 So. 2d 167
    , 171 (Fla. 1995). If a provision disclaims an
    employer-employee relationship in favor of independent contractor status, courts
    honor that provision “unless other provisions of the agreement, or the parties’ actual
    practice, demonstrate that it is not a valid indicator of status.” 
    Id. If the
    parties’ actual
    practice contradicts their written agreement, the actual practice controls. 
    Id. Indeed, independent
    contractor or employee status “depends not on the
    statements of the parties but upon all the circumstances of their dealings with each
    other.” Cantor v. Cochran, 
    184 So. 2d 173
    , 174 (Fla. 1966). So to determine whether
    the parties practice an independent contractor or employee-servant relationship,
    Florida courts consider several factors outlined in the Restatement (Second) of
    Agency § 220. 
    Id. at 174-75.
    The Restatement lists the following ten factors:
    (a) the extent of control which, by the agreement, the
    master may exercise over the details of the work;
    (b) whether or not the one employed is engaged in a
    distinct occupation or business;
    (c) the kind of occupation, with reference to whether, in
    the locality, the work is usually done under the
    direction of the employer or by a specialist without
    supervision;
    (d) the skill required in the particular occupation;
    8
    (e) whether the employer or the workman supplies the
    instrumentalities, tools, and the place of work for the
    person doing the work;
    (f) the length of time for which the person is employed;
    (g) the method of payment, whether by the time or by the
    job;
    (h) whether or not the work is a part of the regular
    business of the employer;
    (i) whether or not the parties believe they are creating the
    relation of master and servant; and
    (j) whether the principal is or is not in business.
    In examining these factors, it is not uncommon for a court to find that not
    “every element [of the Restatement] is so clearly present as to establish beyond
    argument that the arrangement between [the parties] is one of independent
    contractorship” or employer-employee. Miami Herald Publ’g Co. v. Kendall, 
    88 So. 2d
    276 (Fla. 1956). But among these ten factors, the “extent of control” is
    recognized by Florida courts as the most important factor in determining whether a
    person is an employee or independent contractor. Verchick v. Hecht Invs., Ltd., 
    924 So. 2d 944
    , 946 (Fla. 3d DCA 2006) (“It is well-established that the main test in
    determining the existence of an employer-employee relationship is whether the
    employer has direction and control over the employee.”). “Control” refers to “the
    right to direct what shall be done and how and when it shall be done.” Herman v.
    Roche, 
    533 So. 2d 824
    , 825 (Fla. 1st DCA 1988).
    9
    Of course, both employees and independent contractors “are subject to some
    control by the person or entity hiring them. The extent of control exercised over the
    details of the work turns on whether the control is focused on simply the result to be
    obtained or extends to the means to be employed.” Harper ex rel. Daley v. Toler,
    
    884 So. 2d 1124
    , 1131 (Fla. 2d DCA 2004) (citation and quotations omitted). “[I]f
    control is confined to results only, there is generally an independent contractor
    relationship . . . .” 4139 Mgmt. Inc. v. Dep’t of Labor & Emp’t, 
    763 So. 2d 514
    , 517
    (Fla. 5th DCA 2000). By contrast, “if control is extended to the means used to
    achieve the results, there is generally an employer-employee relationship.” 
    Id. For example,
    in A Nu Transfer, Inc. v. Department of Labor & Employment
    Security Division of Employment Security, 
    427 So. 2d 305
    (Fla. 3d DCA 1983), this
    court held that an owner-operator truck driver for an inland carrier was an
    independent contractor because drivers provided their own vehicles, were not
    required to work a specific number of hours, and were permitted to work for a
    competitor company. And in Jean M. Light Interviewing Services, Inc. v. State
    Department of Commerce, 
    254 So. 2d 411
    (Fla. 3d DCA 1971), this court held that
    interviewers for market research were independent contractors because they were
    “free” to refuse a job, to work for competitors, and to complete an assignment “at
    such time and in such matter, or fashion, as the interviewers might desire.” 
    Id. at 412-13.
    10
    Similarly, in 4139 Management 
    Inc., 763 So. 2d at 518
    , the Fifth District held
    that condominium housekeepers were independent contractors because they
    controlled the means to completing a job, were free to refuse a job, and could
    simultaneously “work for others.” 
    Id. at 518.
    See also Sarasota Cnty. Chamber of
    Commerce v. State Dep’t of Labor & Emp’t Sec., Div. of Unemployment Comp.,
    
    463 So. 2d 461
    , 462-63 (Fla. 2d DCA 1985) (concluding salespersons were
    independent contractors because there was “no meaningful supervision over the
    salespersons’ work”; salespersons “set their own schedules and contact such
    prospects as they please,” “furnish and pay for their own transportation,” “are free
    to hire others at their own expense,” and “dress in whatever fashion they
    desire”); VIP Tours of Orlando, Inc. v. State Dep’t of Labor & Emp’t Sec., 
    449 So. 2d
    1307, 1310 (Fla. 5th DCA 1984) (concluding tour guides were independent
    contractors because they were free to reject an assignment, free to determine the
    nature of each tour, and “free to work for other tour services”; the tour company
    “had no right of control over the tour guides other than to require them to show up
    at a particular place at a particular time wearing the [company] uniform and to travel
    in [company] transportation”).
    We agree with the Department’s conclusion that Uber drivers like McGillis
    are not employees for purposes of reemployment assistance. Here, the parties’
    agreement unequivocally disclaims an employer-employee relationship. And the
    11
    parties’ actual practice reflects the written contract. As the Department here found,
    “the central issue is the act of being available to accept requests” and “[t]his control
    is entirely in the driver’s hands.” Drivers supply their own vehicles—the most
    essential equipment for the work—and control whether, when, where, with whom,
    and how to accept and perform trip requests. Drivers are permitted to work at their
    own discretion, and Uber provides no direct supervision. Further, Uber does not
    prohibit drivers from working for its direct competitors. Accordingly, we agree with
    the Department’s assessment that,
    [a]s a matter of common sense, it is hard to imagine many employers
    who would grant this level of autonomy to employees permitting work
    whenever the employee has a whim to work, demanding no particular
    work be done at all even if customers will go unserved, permitting just
    about any manner of customer interaction, permitting drivers to offer
    their own unfettered assessments of customers, engaging in no direct
    supervision, requiring only the most minimal conformity in the basic
    instrumentality of the job (the car), and permitting work for direct
    competitors.
    Rasier, LLC v. Fla. Dept. Econ. Opportunity, 0026 2834 68-02 McGillis (Fla.
    Dept. Econ. Opp. Dec. 3, 2015) at 11.
    Additional facts of this case support this conclusion. For example, Uber sends
    each driver a Form 1099—an IRS form used to report payments to independent
    contractors. See 4139 
    Mgmt., 763 So. 2d at 518
    (“At the end of the year, the
    Association gave the maids a Form 1099 ‘Miscellaneous Income’ for the maids to
    report their income.”). And Uber does not provide fringe benefits, such as medical
    12
    insurance, vacation pay, or retirement pay. See A Nu 
    Transfer, 427 So. 2d at 306
    (“[The truck drivers] do not accrue and are not paid for sick leave or vacation
    time.”); 4139 
    Mgmt., 763 So. 2d at 518
    (“The maids did not receive any benefits
    such as vacation, sick leave or insurance . . . .”); Dep’t of Health & Rehab. Servs. v.
    Dep’t of Labor & Emp’t Sec., 
    472 So. 2d 1284
    , 1287 (Fla. 1st DCA 1985) (noting
    that the independent contractor housekeeper “did not receive fringe benefits, such as
    insurance, as part of her compensation . . . .”); La Grande v. B & L Servs., Inc., 
    432 So. 2d 1364
    , 1367 (Fla. 1st DCA 1983) (“[The taxicab company] provided [the
    taxicab driver] no fringe benefits of the kind usually found in an employment
    relationship.”).
    The fact that Uber may deactivate a driver’s account under certain
    circumstances does not mandate a contrary conclusion. See, e.g., La 
    Grande, 432 So. 2d at 1368
    (“[W]e recognize that the ability to terminate such a relationship at
    will without incurring liability is an attribute more characteristic of an employment
    situation than that of independent contractor. However, although a factor to be
    considered, it is by no means conclusive on the issue of independent contractor
    versus employee status.”). And even though Uber’s principal business is to provide
    transportation, this factor alone is not dispositive. See Jean M. Light Interviewing
    
    Servs., 254 So. 2d at 412-13
    (holding interviewers were not employees even though
    interviewing was the principal business of the interviewing service).
    13
    CONCLUSION
    Uber and McGillis contractually agreed that McGillis’ work did not make him
    an employee. A review of the parties’ working relationship confirms this
    understanding. Due in large part to the transformative nature of the internet and
    smartphones, Uber drivers like McGillis decide whether, when, where, with whom,
    and how to provide rides using Uber’s computer programs. This level of free agency
    is incompatible with the control to which a traditional employee is subject.
    Accordingly, we affirm the final order of the executive director of the Department
    of Economic Opportunity concluding that Uber drivers are not entitled to
    reemployment assistance under section 443.1216 and denying McGillis’ claim for
    reemployment assistance.
    Affirmed.
    14