State News : New Jersey

Julio Pendola fractured his ankle in 2014 picking up a customer and filed a petition in the Division of Workers’ Compensation.  He asserted that he worked exclusively as a driver for Classic, which had over 100 cars.  He purchased his own car after consulting with Classic.  The company required Pendola to paint the car silver and affix the Classic logo to the sides and front of the car with the company’s phone number.  Classic also required Pendola to purchase a two-way radio for installation in the car.  Eventually they changed to computer tablets to dispatch drivers.  All of these expenses were paid for by Pendola along with the medallion, gas, maintenance on his car and liability insurance.

Classic dispatched all the passengers which Pendola picked up.  He could not pick up passengers off the street like a taxi driver.  Pendola paid Classic $150 per week and then kept his fares, grossing between $500 to $700 per week.  Pendola could work when he wanted to work. He had to keep the car clean and dress appropriately.  Otherwise he would be suspended.

Testimony at trial revealed that Classic considered itself to be merely a dispatching service and that drivers were considered independent contractors.  The color of the cars was an article of compliance with the City of Newark Taxi Division.  The company would check on the cleanness of cars that were being used.  The company also furnished drivers with business cards, receipts, vouchers for credit cards, and sometimes key chains and pens.  The company did not issue a 1099 or W-2 because the company considered drivers not to be employees.  The drivers simply would keep their fares.

The Judge of Compensation ruled in favor of Classic and found that Pendola was an independent contractor.  The judge noted that Pendola was free to accept or reject fares and was not supervised by anyone.  In regard to whether Pendola’s work was an integral part of Classic’s business, the Judge of Compensation found that Classic was not dependent on Pendola.  No one driver was essential to the business.

On appeal the Appellate Division observed that drivers were not free to pick up any nearby passenger.  They had to request the ride from the dispatcher, who would then decide which driver would get the assignment.  The Court thought it significant that the company would evaluate the condition of cars.  The Court disagreed on the analysis of the functional relationship between Pendola and Classic.  “It cannot be seriously disputed that Pendola was one of the ‘cogs’ in Classic’s operation.  His work as a driver willing to provide the rides Classic arranged was essential to the success of its business.”

The Appellate Division viewed Classic as more than a dispatching company but instead viewed it as a transportation company.  The Court noted that it had found Classic to be an employer in a prior case along the same lines in 1999.  It saw no reason to vary from that prior decision and reversed in favor of Pendola.

The case can be found at Pendola v. Milenio Express, Inc., d/b/a/ Classic, A-0225-17T2 (App. Div. October 26, 2018).  It shows how New Jersey courts will likely consider drivers for companies like Lyft and Uber when such cases find their way to the Appellate level.

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John H. Geaney, Esq., is an Executive Committee Member and a Shareholder in Capehart Scatchard's Workers’ Compensation Group.  Mr. Geaney concentrates his practice in the representation of employers, self-insured companies, third-party administrators, and insurance carriers in workers’ compensation, the Americans with Disabilities Act and Family and Medical Leave Act. Should you have any questions or would like more information, please contact Mr. Geaney at 856.914.2063 or by e‑mail at jgeaney@capehart.com.