N.Y.: U.S. Second Circuit Court of Appeals upholds New York Black Car Operators Injury Compensation surcharge on noncash tips

January 22, 2024

In a victory for black car and gig drivers, the U.S. Second Circuit Court of Appeals unanimously ruled 3-0 that the New York Black Car Operators’ Injury Compensation Fund has the statutory authority to impose a 2.5% surcharge on noncash tips. This ruling was made on Jan. 2, 2024.

This overturned the U.S. District Court’s decision in the Southern District of New York, which declared the surcharge illegal, certified the claim as a class-action lawsuit, and ordered the return of $8.5 million to passengers by the New York Black Car Operators’ Injury Compensation Fund.

Westchester County resident and frequent black car rider Joseph Kasiotis filed a class-action claim against the New York Black Car Operators Injury Compensation, alleging unjust enrichment and asserting that the fund lacked authorization to impose a surcharge on noncash tips from January 2000 through Feb. 1, 2021.

The rulings

Specifically, the plaintiff contends that although Article 6-F of the New York Executive Law created a workers’ compensation fund for black car drivers with the ability to impose a surcharge for black car “services,” a noncash tip is not considered payment for services—rather it’s akin to a gift. The District Court for the Southern District agreed with that assertion, finding the fund was only authorized to impose a surcharge on the cost that passengers pay for their ride, not on the drivers’ tips.

On appeal, the Second Circuit Court of Appeals addressed a crucial question: whether a noncash tip is considered a “payment for covered services” within the meaning of Executive Law Section160-jj (2)? In interpreting the meaning of “covered services,” the court examined Executive Law Section 160-cc (4), which defines “covered services” in relevant part as “all dispatches” from central dispatch facilities located within the state and “all dispatches involving a pick-up in the state” where the central dispatch facility is located outside of the state.

While the definition limits the application of the surcharge to rides within “certain specified connections to the state,” the court noted that the statute doesn’t restrict the types of charges, line items, or components of an invoice, bill or credit payment. Consequently, the Second Circuit Court of Appeals concurred with the fund’s interpretation, stating that the plain language of Article 6-F of the Executive Law authorizes the fund to apply the surcharge to the entire invoice, billing or credit payment for a trip.

Authority upheld

Barring a final appeal to the U.S. Supreme Court, this ruling made by the U.S. Second Circuit Court of Appeals in Kasiotis v. N.Y. Black Car Operators’ Inj. Comp. Fund Inc. (2024) upholds the authority and original intention established by the Legislature in 1999 when it created the New York Black Car Operators’ Injury Compensation Fund to provide free-of-charge workers’ compensation coverage and other benefits to black car and gig drivers.

The decision not only solidifies the fund’s ability to levy the surcharge on noncash tips, but also reinforces the foundational purpose envisioned by the Legislature for supporting and safeguarding the welfare of black car and gig drivers in New York state.

Theophilus Alexander
PIA Northeast

Theophilus W. Alexander joined PIA Northeast as a government & industry affairs specialist for the Government & Industry Affairs Department in 2023. Prior to joining PIA, Theo had served in both houses of the New York State Legislature. Previously, he worked as a legislative analyst for Hon. New York State Sen. Samra G. Brouk, D-55, and he served at the New York State Assembly, as a policy analyst with New York Assembly Program & Counsel. Theo received his Bachelor of Arts degree in Politics from Ithaca College in Ithaca, N.Y.

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