McGillis v. Dept. of Economic Opportunity

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.
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