Federal appeals court says cabdrivers aren't city employees

A federal appeals court panel has dismissed a class-action lawsuit that sought financial relief for struggling Chicago cabdrivers based on a novel theory that cabbies are so heavily regulated they should be classified as city employees guaranteed the city’s $10-an-hour minimum wage and compensated for overtime.

Veteran cabdriver Melissa Callahan had argued that cabbies struggling to survive in the Uber age are not coming close to earning the minimum wage after expenses such as lease fees, gasoline and insurance are deducted.

She argued that the cash-strapped city should make up the difference because it regulates fares and lease rates and imposes other revenue-raising constraints on the industry.

The Appellate Court didn’t buy it.

In a ruling handed down this week, the court noted that Callahan “does not own any asset whose market value has been reduced by the city’s regulation of taxi fares.”

And although drivers who own cabs or medallions are “potentially adversely affected” by a city cap on lease rates, the ruling states that, “None of Callahan’s property is subject to rate regulation. . . . She owns her own time, but Chicago does not require her to devote any of that time to taxi driving.”

“Competition in the labor market tells Callahan what an hour of her time is worth and she cannot recover from the city if she now rues devoting as much time as she did to driving other people’s taxis,” the ruling states.

The Appellate Court also dismissed as “extravagant” Callahan’s claim that taxis are an important source of revenue for the city and that commerce would be paralyzed without them.

“If taxis are vital, so are restaurants and retail shops and hotels and hospitals. . . . Well, the list is endless. Everyone who contributes to city life [and directly or indirectly to the tax base] would be a public employee,” the ruling states.

“Restaurants often fail and their proprietors may find that they have lost money on the venture. If Callahan is right, however, every failed restauranteur could turn to the city for the minimum wage. More than wages are at stake. If workers in regulated occupations really are public employees . . . no one could be fired in Chicago unless the city approved after notice and an opportunity for a hearing. Newspaper editors could not edit reporters’ stories because public employees cannot censor speech. Abolishing the distinction between public and private employment would work a legal revolution.”

Callahan was bitterly disappointed by what she called the “very political” decision. She promised to pursue the appeal — either by asking for a hearing by the full Appellate Court or with an even longer shot appeal to the U.S. Supreme Court.

“It was a unique theory far too radical for the court to wrap their heads around. Unfortunately, the fear of what the implications would be in other industries was scary for these judges. Rather than base their decision on the merits of the case, they based it on their political concerns. That’s really troubling to me,” she said.

“City government is picking and choosing who they regulate tightly and who they don’t,” she said. “With Uber and Lyft, they’re allowing cab fares to be undercut so they can take all of our business. This is creating a financial bloodbath. Cabdrivers are going into bankruptcy. They’re lucky if they can just cover their expenses, let alone eke out a profit, and the city is watching it all happen.”

Two years ago, Callahan presented evidence she hoped would bolster her claim to have cabdrivers declared as city employees entitled to the minimum wage and overtime.

It showed that half of Chicago cabdrivers were earning less than the minimum wage — and more than 10 percent were losing money — in a taxi industry that, at the time, was generating $30 million in annual city revenue.

That has only increased with tens of millions of dollars of increased fees in Mayor Rahm Emanuel’s 2016 budget and with Emanuel’s decision to give cabdrivers a 15 percent fare increase — but hand ride-hailing companies the lucrative right to make pickups at O’Hare and Midway Airports, McCormick Place and Navy Pier.

Cabdrivers accused the mayor of giving away the store to Uber, whose investors include Hollywood super-agent Ari Emanuel, the mayor’s brother.