NY Court of Appeals Grapples With Classifying Gig Workers and the Modern Economy

The New York Court of Appeals recently affirmed the decision of the Unemployment Insurance Appeals Board that Postmates couriers should be classified as employees, not independent contractors, for purposes of unemployment insurance.

Through its webpage and app, Postmates customers place orders from stores and restaurants. Postmates couriers pick up and deliver those goods to the users in exchange for a portion of the delivery fee that Postmates collects. The Unemployment Insurance Appeals Board found that Luis Vega, a courier who was barred from delivering through Postmates after negative customer reviews, was improperly classified as an independent contractor. As a result, Vega was eligible for unemployment benefits, and more significantly, Postmates was required to pay into New York’s Unemployment Insurance Fund for all of its couriers.

Many states, particularly in the context of unemployment, have adopted the stringent A-B-C Test for determining whether a worker is an employee or contractor. Under that test, a worker is an employee unless all of the following criteria are satisfied: A. the worker is free from the employer’s control or direction in performing the work; B. the work takes place outside the usual course of the business of the company and off the site of the business; and C. the worker customarily is engaged in an independent trade, occupation, profession, or business.

New York, by contrast, has long relied on the multifactor common law right to control test in the unemployment context. Unlike the A-B-C Test, no one factor is decisive. The factors largely focus on supervision, direction and control, the first factor of the A-B-C- Test.

Applying the test here, the Court of Appeals examined “whether [Postmates] exercised control over the results produced by the worker or the means used to achieve the results.” The Court concluded that Postmates exercises more than mere “incidental control” over its couriers and noted that the couriers are low-paid workers, who perform unskilled labor, and who have little discretion over how to perform their work because Postmates:

1. Determines which couriers had access to each assignment;
2. Does not allow customers to select specific couriers for deliveries;
3. Replaces couriers who become unavailable after accepting a job;
4. Tracks the courier’s location and provides customers with estimated delivery times;
5. Sets the delivery fee charged to the customers;
6. Pays couriers a non-negotiable percentage of the delivery fee;
7. Bears the risk of loss by paying couriers for deliveries regardless of whether a customer pays;
8. Provides prepaid debit cards that couriers may use to purchase customer goods, as needed; and,
9. Handles customer complaints, sometimes retaining liability to customers for incorrect or damaged deliveries.

Postmates argued that couriers controlled if and when they performed work by logging on to the app, couriers had the freedom to accept or reject any delivery, and couriers could choose their routes and preferred method of transportation. Additionally, Postmates argued that it was merely a technology company, not a delivery provider. The Court rejected these arguments, finding that, although the couriers may have some independence, they did not ultimately control the terms of their work. Significantly, Postmates could not operate without its couriers, underscoring that its business revolves around delivery services, not technology services.

In concurrence, Judge Jenny Rivera noted that the common law control test was increasingly inapplicable in today’s world of gig economy workers and companies. Judge Rivera recommended adopting the test from the Restatement of Employment Law, which “alternatively considers the worker’s entrepreneurial control over their services and the extent to which the employer effectively prevents such workers control.” Restatement of Employment Law § 1.01.

In the same vein, dissenting Judges Rowan Wilson and Michael J. Garcia noted that the majority’s opinion failed to “recognize that the realities of the contemporary working world have outpaced [Court] jurisprudence.” The dissent suggested that the legislature should adapt the test to the present economy.

This ruling follows a July 2018 decision of the New York Unemployment Insurance Appeals Board finding that Uber drivers were employees, not independent contractors. Uber did not appeal the decision.

The implications of this decision are potentially wide reaching. New York uses the common law control test under many employment laws, including the New York State Human Rights Law, the New York worker’s compensation laws, and the New York City Human Rights Law. It also likely will apply to New York’s recently enacted COVID-19 Paid Sick Leave Law, which was just expanded to provide more comprehensive paid sick leave for employees in 2021. The Court’s expansive reading of "employment" in this decision could therefore be the harbinger of other decisions that will require New York employers to reclassify many workers who are currently treated as independent contractors. 

This decision also raises numerous questions in light of the current pandemic. As gig workers are granted more and more benefits, while simultaneously being lauded as heroes who continue to work despite the risk of COVID-19 infection, how will the law and businesses treat them in the future? Will gig workers have increased bargaining power, and perhaps be more aggressive in demanding higher pay and portable benefits going forward? Will we return in a post-pandemic future to the status quo ante where gig workers were not considered “essential” and had little leverage? Only time–and possibly litigation–will tell in what direction we’re headed.

Attorneys in Ballard Spahr’s Labor and Employment Group are well versed in federal, state, and local employment-related laws, and are closely following all developments regarding the gig economy and contingent workforces.

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