In In re Vega, 2020 WL 1452612 (N.Y. Mar. 26, 2020), the New York State Court of Appeals held that there was substantial evidence supporting the state’s Unemployment Insurance Appeals Board’s determination that delivery couriers for Postmates, Inc., were employees for whom Postmates was required to make contributions to the unemployment-insurance fund under New York’s Unemployment Insurance Law. The concurring opinion advocated for the court to adopt the Restatement of the Law, Employment Law’s approach for determining whether a worker was an employee, in which a worker’s entrepreneurial control was considered, rather than the common-law test or employer-control test that the court applied.
Postmates, Inc., uses a website and smartphone application for its approved couriers to accept a job in which they pick up goods from local restaurants and stores and deliver them to customers. In this case, the claimant was a courier who filed for unemployment benefits after Postmates blocked him from using its application due to customers’ negative reviews. The Department of Labor determined that the claimant was an employee, “requiring that Postmates pay unemployment insurance contributions on [his] earnings, as well as on the earnings of ‘all other persons similarly employed.’” After Postmates objected, an administrative-law judge found that the claimant was an independent contractor for whom no contributions to the unemployment-insurance fund had to be made. The Unemployment Insurance Appeals Board reversed the administrative-law judge’s decision and sustained the Department’s initial determination that the claimant was an employee, concluding that the ‘“claimant and any other on-demand couriers (delivery drivers) similarly situated’ were employees because Postmates exercised, or reserved the right to exercise, control over their services.” The New York Supreme Court, Appellate Division, reversed and remitted to the Board for further proceedings, holding that the evidence of Postmates’ incidental control over the couriers did not constitute “substantial evidence” of an employer–employee relationship, because it “fail[ed] to provide sufficient indicia of Postmates’ control over the means by which these couriers perform their work.”
The New York State Court of Appeals reversed the Appellate Division’s order and reinstated the Board’s decision that the couriers were employees, holding that there was “substantial evidence in the record to support the Board’s determination that Postmates exercised control over its couriers sufficient to render them employees rather than independent contractors operating their own businesses.” The court explained that “the touchstone of the analysis is whether the employer exercised control over the results produced by the worker or the means used to achieve the results.” While Postmates’ couriers can access the application and accept jobs whenever they like, Postmates determines which couriers have access to potential delivery jobs and only informs couriers of the delivery address after a courier accepts that job. Couriers can determine what route to take to the delivery address, but the application allows Postmates and its customers to track the couriers’ locations to provide an estimated delivery time. A courier’s compensation is unilaterally fixed; is paid by Postmates, not the customer; and is based on the distance to the delivery address, making couriers unable to determine their compensation until after they accept a job.
In her concurring opinion, Judge Jenny Rivera agreed that “[t]he majority correctly describe[d] our multi-factor test . . . , and reasonably consider[ed] the Board’s application of the relevant factors here”; however, “while the test is well-suited to most cases, it has its limits and may prove difficult to apply to electronically mediated work arrangements.” She instead proposed that the court adopt the Restatement of the Law, Employment Law’s approach—which “considers the worker’s entrepreneurial control over their services and the extent to which the employer ‘effectively prevents’ such worker control”—and pointed out that the Restatement’s approach addresses concerns to which the court had previously responded, and fits with New York case law.
Judge Rivera explained that New York case law applied the factors set forth in Restatement of the Law, Agency § 220, whose right-to-control test was retained in the subsequent Restatement of the Law Second, Agency § 220 and Restatement of the Law Third, Agency § 7.07. She reasoned that the analysis set forth in Restatement of the Law, Employment Law § 1.01 for determining whether a worker was an employee or independent businessperson “draws from the common-law right of control test described in the Restatements of Agency, but recognizes the test ‘looks not only to the principal’s control of the physical details of how the service provider performs the service, but also to the principal’s control of other aspects of the service provider’s performance that determines whether [they are] able to provide those services as an independent businessperson’” (quoting § 1.01, Comment e).
Cautioning that independent-contractor status should not be based on “illusory opportunities for worker entrepreneurialism,” and quoting § 1.01(b), Judge Rivera determined that Postmates’ couriers are not independent contractors because, among other things, even though they can work for other employers, they “cannot build a client-base through their business savvy; apart from the moment of delivery, customer contact is through Postmates, and customers do not choose a delivery person,” “[n]or does the work lend itself to the ‘exercise[] of entrepreneurial control over important business decisions.’” Furthermore, the evidence showed that couriers ‘“can affect their remuneration or other economic interest only by working harder or more skillfully on [Postmates’] behalf,’” (quoting § 1.01, Comment f), whereas those with entrepreneurial control over business decisions ‘“can seek to increase their personal economic returns not simply by working harder in performing the service for the principal but also by working at their discretion for other customers, by hiring assistants and by deploying or substituting for labor their own equipment or capital’” (quoting § 1.01, Comment e).