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JTE Enters., Inc. v. Cuomo

United States District Court, E.D. New York

February 15, 2014

JTE ENTERPRISES, INC., Plaintiff,
v.
ANDREW M. CUOMO, in his official capacity as Governor of the State of New York, THOMAS DI NAPOLI, in his capacity as Comptroller of the State of New York, PETER M. RIVERA, as Commissioner of the State of New York Labor Department, and LEONARD D. POLLETTA, Chairman of the Underemployment Insurance Appeal Board, Defendants

Page 334

For the Plaintiff: Eugene F. Haber, Esq., of Counsel, Cobert, Haber & Haber, Mineola, NY.

For the Defendants: Toni E Logue, Assistant Attorney General, Richard Yorke, Volunteer Attorney, New York State Attorney General's Office, Mineola, NY.

OPINION

Page 335

MEMORANDUM OF DECISION AND ORDER

ARTHUR D. SPATT, United States District Judge.

On March 19, 2013, the Plaintiff JTE Enterprises, Inc. (the " Plaintiff" ), commenced this action against Andrew M. Cuomo, in his official capacity as Governor of the State of New York; Thomas Di Napoli, in his capacity as Comptroller of the State of New York; Peter M. Rivera, as Commissioner of the State of New York Labor Department (the " Department of Labor" ); and Leonard D. Polletta, Chairman of the Unemployment Insurance Appeal Board (the " UIAB" and collectively, the " Defendants" ). The Plaintiff seeks an order from the Court (1) classifying the drivers of its taxi cab vehicles as either independent contractors or as employees of the Plaintiff; (2) in the event the Court determines the drivers are independent contractors, declaring that a UIAB determination classifying the drivers as employees is null and void; (3) pursuant to 42 U.S.C. § 1983, finding that the Department of Labor denied the Plaintiff its basic due process rights by allegedly preventing the Plaintiff from appealing the UIAB's determination; and (4) in the event the Court determines the drivers are employees, directing a refund of all monies the Plaintiff paid for sales taxes on the leases of the taxi cab vehicles to the drivers.

Presently before the Court is a motion by the Defendants to dismiss the Plaintiff's Complaint in its entirety, which the Defendants have brought under Federal Rules of Civil Procedure (" Fed. R. Civ. P." ) 12(b)(1) and (6). For the reasons that follow, the Court grants the Defendants' motion.

I. BACKGROUND

The Plaintiff operates a taxi cab and livery service in Suffolk County, New York. The Plaintiff's employees include a clerical staff and dispatchers who work in its Islandia office. For these employees, the Plaintiff pays unemployment insurance premiums.

However, with respect to the drivers of its taxi cab vehicles, the Plaintiff uses " for hire" vehicles, for which it hires drivers allegedly as independent contractors. The drivers do not work on a regular basis and do not have a regular schedule. They are also free to work for other " for hire" taxi cab companies that are in competition with the Plaintiff. In addition, the drivers receive no benefits and no taxes or social security payments are withheld because they are not paid a salary.

Rather, the drivers sign lease agreements to use one of the Plaintiff's " for hire" taxi cabs, by which they agree to pay the Plaintiff a percentage of the income he earns that day from operating the taxi cab. During the day, the Plaintiff dispatches

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the driver to its customers, who call in requesting transportation services. However, the drivers are permitted to decline any of these calls for cab service request.

According to the Plaintiff, the drivers of its " for hire" vehicles should be classified as independent contractors because they are not subject to the Plaintiff's dominion or control so as to be classified as employees entitled to unemployment insurance benefits. Also, the New York State Department of Taxation and Finance collects a sales tax from the Plaintiff on the leases it enters into with the drivers.

Nevertheless, the Department of Labor audited the Plaintiff's books and records for the period of December 1, 1999 through August 31, 2003. As a result of the audit, the Department of Labor concluded that the Plaintiff owed $35,801.57 for unemployment insurance premiums for the drivers of the " for hire" vehicles. It also assessed a fifty percent fraud penalty of $17,900.78.

The Plaintiff opposed the Department of Labor's decision that the drivers were employees rather than independent contractors and further contested the fraud penalty assessment. Accordingly, the Plaintiff challenged the decision and the Department of Labor by initiating an Article 78 proceeding under the New York Civil Practice Law and Rules. Thereafter, the Plaintiff and the Department of Labor entered into a Stipulation of Settlement and Discontinuance whereby the Department of Labor consented to process the Plaintiff's request for a hearing before an ...


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