Court Upholds New York Fund’s Authority to Surcharge Noncash Tips for Black Car Drivers

The Second Circuit Court of Appeals ruled in favor of the New York Black Car Operators’ Injury Compensation Fund, allowing it to impose a 2.5% surcharge on noncash tips paid to drivers. This decision overturns a previous ruling by the U.S. District Court for the Southern District of New York, which had declared the surcharge illegal and certified a class action demanding the fund to refund $8.5 million to passengers.

The case was initiated by Joseph Kasiotis, a frequent user of livery services, who argued that the fund, established by Article 6-F of the New York Executive Law, was not authorized to levy a surcharge on noncash tips, considering them akin to gifts rather than payment for services. The district court agreed, ruling that the surcharge could only be applied to the cost of the ride.

However, the federal appeals panel sided with the fund, concluding that the statute’s language unambiguously permits the surcharge on noncash tips, countering the claim of unjust enrichment. They ordered the claim dismissed, recognizing the fund’s consistent practice of imposing a surcharge on noncash tips for approximately 20 years.

Established in 1999, the New York legislature created the fund as a not-for-profit corporation to provide workers’ compensation benefits to black car drivers, including those from app-based transportation companies like Uber, Lyft, and Via. The fund collects a ‘uniform percentage surcharge’ on black car services to cover operating costs, insurance, benefits payments, expenses, and liabilities. The court emphasized that the statute’s definition of ‘covered services’ only imposes a geographic limitation, not a restriction on the types of charges subject to the surcharge. This decision reaffirms the fund’s method of surcharging fares, which excludes certain line items like sales taxes and congestion charges, but includes noncash tips.