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Sebago v. Boston Cab Dispatch, Inc.

Supreme Judicial Court of Massachusetts, Suffolk

April 21, 2015

Bernard Sebago & others [1]
v.
Boston Cab Dispatch, Inc ., & others [2] (and a consolidated case [3] )

Argued January 8, 2015.

Civil actions commenced in the Superior Court Department on March 6 and September 14, 2012.

After consolidation, the case was heard by Linda E. Giles, J.,

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on motions for summary judgment, and the case was reported by her to the Appeals Court.

The Supreme Judicial Court granted an application for direct appellate review.

Shannon Liss-Riordan ( Adelaide Pagano with her) for Bernard Sebago.

Andrew Good ( Philip G. Cormier with him) for Edward J. Tutunjian.

Albert A. DeNapoli ( Emily C. Shanahan with him) for USA Taxi Association, Inc.

Nathan L. Kaitz, for John Byda, was present but did not argue.

The following submitted briefs for amici curiae:

Norman M. Leon, of Illinois, & Matthew Iverson for International Franchise Association.

Nicole Horberg Decter & Don Siegel for Massachusetts AFL-CIO.

Stevan Johnson, pro se.

Helen G. Litsas, Special Assistant Corporation Counsel, for city of Boston.

Present: Gants, C.J., Spina, Cordy, Botsford, Duffly, & Hines, JJ.

OPINION

[28 N.E.3d 1142] Cordy, J.

In this case, we must determine whether licensed taxicab drivers in the city of Boston (city) may be classified properly as independent contractors, see G. L. c. 149, § 148B (independent contractor statute), in accordance with Boston Police Department Rule 403, Hackney Carriage Rules and Flat Rate Handbook (2008) (Rule 403). Rule 403 is a comprehensive set of regulations for the Boston taxicab industry, promulgated by the city's police commissioner (commissioner) pursuant to an express delegation of authority by the Legislature. St. 1930, c. 392, as amended by St. 1931, c. 408, § 7, and St. 1934, c. 280.

[28 N.E.3d 1143] The plaintiffs in these consolidated cases, Bernard Sebago, Pierre Duchemin, Ahmed Farah, and Yves Bien-Aime, are licensed taxicab drivers in the city. They contend that they were employees of the defendants but were misclassified as independent contractors, thereby depriving them of minimum wages, overtime pay, tips, and the protections afforded by the Wage Act, G. L. c. 149, § 148. The defendants include taxicab owners, radio associations, and a taxicab garage. They argue that their relationships with the plaintiffs must be considered in the context of Rule 403, which explicitly permits drivers to operate as independent contractors. The plaintiffs reply that a municipal regulation cannot override the State's independent contractor statute.

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We read Rule 403 and the independent contractor statute in harmony and conclude that the plaintiffs were not employees of the defendants. Rule 403 neither precludes taxicab owners from entering into employer-employee relationships with drivers nor recasts drivers as independent contractors where they would otherwise be considered employees. Rather, Rule 403 creates a regulatory regime over an industry in which taxicab owners, radio associations, and drivers may operate as separate businesses. Given the Legislature's broad grant of authority to the commissioner, we cannot say that Rule 403 is contrary to the policies undergirding the independent contractor statute.[4]

1. Background.

In 1930, the Legislature granted the commissioner the exclusive authority to regulate the city's taxicab industry. St. 1930, c. 392, § 1 ( " police commissioner of the city of Boston shall have exclusive authority to make rules and orders for the regulation of hackney carriages and hackney stands" ). In 2008, acting pursuant to that mandate, the commissioner promulgated Rule 403, creating a comprehensive system of rules and regulations governing the ownership, leasing, licensing, rate setting, and operation of taxicabs in the city. Rule 403, § 1(II). We summarize how the taxicab industry is designed to operate under Rule 403, reserving certain details for the issues raised on appeal.

Rule 403 defines what it means to be a Boston taxicab. In order to qualify, a vehicle must, among other things, be " outfitted with an approved Protective Partition dividing the driver's and passenger's seats" ; be " outfitted with an approved taximeter" ; be " enrolled in a Radio Association and painted with the approved Radio Association colors and markings" ; " display the current fare rate cards on the inside of the vehicle, in clear view of the passengers" ; display " lease/shift rate stickers ... in clear view of the Driver" ; " be equipped with an electronic credit card processing capability" ; and " be equipped with two-way communication linked to an approved dispatch service or radio association." Rule 403, § § 3(III)(C), 7(I)(a).

In order for a qualifying taxicab to be put into service, the owner must obtain a license, called a " medallion," for each such taxicab. Rule 403, § 3(III)(c)(ix). Rule 403 sets forth a myriad of requirements that must be met in order to qualify for a medallion, including being deemed " suitable" individuals by the city's in-

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spector of carriages, obtaining adequate garage facilities within the city, and maintaining membership in an approved " dispatch service or radio association, which provides twenty-four (24) hour two-way communication solely, and exclusively, for Boston [taxicabs]." Rule 403, § 4(II)(a), (l), (q).

[28 N.E.3d 1144] The radio associations, in turn, are required to provide certain enumerated dispatch services to their members and may accept payment for those services only from medallion owners. Rule 403 imposes strict operational standards on the radio associations, ranging from record-keeping and financial reporting requirements to city approval of the association's colors and designs that are painted on their members' taxicabs. A radio association's failure to comply with Rule 403 is cause for its immediate removal from the commissioner's list of approved dispatchers, in which case, medallion owners have thirty days to enroll in a different radio association. Rule 403, § 7.

Drivers are likewise subject to a distinct set of requirements under Rule 403, including training supervised by the city's inspector of carriages, obtaining taxicab driver licenses, and complying with numerous operational rules ranging from personal appearance to treatment of passengers. The procedures set forth in Rule 403 for picking up passengers at public taxi stands are highly specific, instructing drivers, inter alia, how to line up (" Take proper position in rear of the Hackney Carriage line" ); what activities they may engage in while waiting in line (" Driver may perform small cleaning tasks while on a public stand" ); and how they may solicit passengers (" from inside the vehicle by motion of the hand" ). Rule 403, § 5(II)(u). The fares that they collect from passengers are determined by meter and flat rates set by the commissioner and specified in Rule 403. See Rule 403, § 10. In sum, businesses operating under the regime of Rule 403 may be described aptly as members of a highly regulated industry.

Rule 403 contemplates four business models under which a taxicab may be put into service: (1) the " owner-operator" model, whereby a medallion owner with a qualifying taxicab transports customers in exchange for fares and tips, Rule 403, § 3(I)(f); (2) the " leased" model, whereby a medallion owner leases a medallion to a taxicab owner, who then operates the medallioned taxicab, Rule 403, § 3(I)(g); (3) the " shifted" model, whereby a medallion owner leases both a medallion and a taxicab to a driver to operate for a " shift," which is typically twelve hours in dura-

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tion, Rule 403, § 4(I)(c); and (4) the " managed" model, whereby a medallion owner leases medallions to a " manager," who then subleases medallions and taxicabs to drivers for shifts. Rule 403, § 4(I)(a), (b). Rule 403 neither expressly permits nor prohibits a model in which drivers operate as employees of medallion owners, radio associations, or taxicab garages.

The defendants in these cases include medallion owners, radio associations, and a taxicab garage. Edward Tutunjian, John Byda, and George Summers each own corporations that, in turn, own and lease varying quantities of taxicabs and medallions (collectively, medallion owners).[5] Tutunjian also owns Boston Cab Dispatch, Inc. (Boston Cab), which is one of the seven radio associations authorized by Rule 403. Summers and Byda each are members of the unincorporated Independent Taxi Owners Association (Independent Taxi), another of the radio associations authorized by ...


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