A group of California airport shuttle drivers, long classified as independent contractors, sued in federal district court, seeking to be reclassified as employees. They argued their employer had enormous control over their work. But such drivers are also regulated by the state’s Public Utilities Commission, and judges wrestled with what role courts could play.

What happened. SuperShuttle International classified all its drivers as “independent contractor franchisees.” But according to the drivers, the firm designated their driving areas, set fares, and required adherence to detailed appearance and behavior standards. They went to court, seeking employee status, in order to win overtime and minimum wages, meal break pay, and other rights under the California Labor Code. But a federal district court dismissed their claims, saying it had no jurisdiction.

That's because a few sections of Public Utilities Commission (PUC) regulations cover passenger services corporations. One of those sections states, “Every driver of a vehicle shall be … under the complete supervision, direction and control of the operating carrier and shall be an employee of the certificate holder; or, an employee of a sub-carrier; or, an independent owner-operator who holds charter-party carrier authority and is operating as a sub-carrier.”

The district court judge, understanding that the PUC’s goal is ensuring public safety, found that regulation so detailed and specific that he felt precluded from ruling on the issue of the drivers’ status. The drivers appealed to the 9th Circuit, which covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

What the court said. Appellate judges noted that a friend-of-the-court brief from the PUC said the commission has never exercised its authority over shuttle driver classification issues. They also reviewed an earlier state supreme court ruling that created a three-part test addressing the “tension” between sections of PUC regulations. If (a) the PUC “had the authority to adopt a regulatory policy” on the classification of drivers by a company like SuperShuttle, and (b) the PUC did so, and (c) the drivers’ lawsuit would “hinder or interfere with the PUC’s … authority,” the PUC would prevail. But since the PUC had not used its authority, judges said a court’s ruling would not hamper that authority. So the drivers’ case will go back to the district court. Kairy et al. v. SuperShuttle, U.S. Court of Appeals for the 9th Circuit, No. 10-16150 (2011).

Point to remember: The U.S. Department of Labor is currently cracking down on misclassification of employees as independent contractors.