New York Fund for Injured Black Car Drivers Wins Surcharge Fight

The New York workers’ compensation fund for black car drivers was within its authority to impose a 2.5% surcharge on noncash tips that passengers paid to drivers, a three-justice panel of the Second Circuit Court of Appeals unanimously ruled on January 2.

The ruling reverses a decision by the U.S. District Court for the Southern District of New York that found the surcharge was illegal, certified the claim as a class action, and indicated that $8.5 million should be returned by the injured drivers’ fund to passengers.

The class action against the New York Black Car Operators’ Injury Compensation Fund was brought by Joseph Kasiotis, a frequent user of livery services (black cars), who argued that the fund was not authorized to impose a surcharge on noncash tips and the fund had been unjustly enriched by the surcharge.

Kasiotis argued that while the statute that created the fund allows it to levy a surcharge on black car “services,” a noncash tip is not a payment for services. It is more akin to a gift, he insisted.

The fund defended the surcharge, arguing that the statute establishing the fund – Article 6-F of the New York Executive Law – authorizes the imposition of the surcharge on noncash tips that it has levied for 20 years and the fund was not unjustly enriched.

When the district court granted summary judgment to Kasiotis, it held that the fund could only impose a surcharge on the cost that passengers pay for their ride, not on their tips.

The federal appeals panel agreed with the fund. It concluded that the plain language of the statute authorizing the fund unambiguously allows it to impose a surcharge on noncash tips and that the district court erred in holding that the fund was unjustly enriched by this practice. The Second Circuit judges ordered the claim dismissed.

In 1999, the New York legislature established the fund as a not-for-profit corporation to provide workers’ compensation benefits to the black car drivers in the state. All central dispatch facilities – e.g., qualifying livery and black car operators that dispatch for-hire vehicles – must become members of the fund as a condition of conducting business in the state.

The fund’s initial members were generally black car companies, such as limousine services and companies geared toward corporate clients. In recent years, the fund’s membership has expanded to also include app-based transportation companies like Uber, Lyft and Via with gig workers as drivers.

Article 6-F enables the fund to collect a “uniform percentage surcharge” on black car services in order to cover its estimated operating costs, which include the costs of insurance, benefits payments, expenses, and liabilities.

The key question before the court was whether a noncash tip is considered a “payment for covered services” within the meaning of the statute. The appeal panel concluded that it “plainly is.”

The court noted that Article 6-F defines “covered services” as “all dispatches” that originate from a New York dispatch facility or involve a pick-up in New York. By its clear terms, this definition limits the application of the surcharge to rides with certain specified connections to the state. Critically, however, the definition of “covered services” in no way limits the specific types of charges or line items that are considered “covered” under the statute. “Indeed, the unambiguous language of the statute makes clear that the term “covered services” imposes only a ‘geographic limitation’ on trips to which the surcharge can be applied,” the court stated.

According to court documents, in practice, the fund does not typically apply the surcharge to the entire invoice, bill, or credit payment from a ride, excepting certain line items such as sales taxes, congestion charges, and cancellation fees from the surcharge. The fund has, however, consistently imposed a surcharge on noncash tips for the approximately 20-year period from its creation until February 2021, when it changed its policy to surcharge fares in accordance with the district court ruling that has now been overturned.

Ira Goldstein, executive director of The Black Car Fund, said the ruling affirms that the fund operated in accordance with its founding statute. He called The Black Car Fund a “nation-leading model” that provides workers’ compensation and other benefits at no cost to drivers, which gig workers in other states don’t have, by charging passengers a small amount on each trip. “We are proud of the work we do and look forward to continuing to provide this comprehensive and critical safety net of health-related benefits to our Covered Drivers,” Goldstein added in his statement.

Topics Auto New York Personal Auto