New York Court Rules Gig Drivers Are Employees Eligible for Unemployment Benefits

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Drivers for the online food delivery service Postmates Inc. are employees who are eligible for state unemployment insurance, New York’s top court has ruled.

The ruling upsets the “gig” business model of courier service Postmates and other platforms like transportation firm Uber that have insisted their delivery persons are independent contractors rather than employees and thus not eligible for benefits like unemployment insurance. The two firms have lobbied for the government to recognize a third classification of workers between employees and independent contractors.

The case reached the top court as Postmates sought to overturn the state’s Unemployment Insurance Appeal Board’s decision in favor of the driver, Luis Vega, who filed for unemployment benefits after he was terminated in 2015. Postmates won on appeal in state court in 2018 but now has lost in the state’s top court.

The majority of judges on the New York State Court of Appeals agreed with the state board that the company’s workers are employees and not independent contractors and found Postmates must pay into the state’s unemployment insurance fund for each employee.

New Tech, Old Story In Vega v. Postmates, the New York State Court of Appeals harkened back to a different era and a 1986 case: Although the operative technology has changed in the interim decades, this case is indistinguishable from Matter of Rivera, where we held that substantial evidence supported the Board’s conclusion that a similar delivery person was an employee of the delivery company—even though he set his own delivery routes and did not have a set work schedule but called the company’s dispatcher whenever he wished to engage in work, accepting only the jobs he desired.

Postmates is a delivery business that uses a website and smartphone application to dispatch couriers to pick-up and deliver goods from local restaurants and stores to customers in cities across the United States.

The court looked to the traditional test of whether the employer exercises control over the results produced or the means used to achieve the results and found that Postmates “dominates the significant aspects of its couriers’ work by dictating to which customers they can deliver, where to deliver the requested items, effectively limiting the time frame for delivery and controlling all aspects of pricing and payment.”

The court noted that the application of this test “will necessarily vary depending on the nature of the work,” adding that Postmates’ couriers perform unskilled labor and have little input over how to do their jobs.

The court said there is “substantial evidence” to support the determination that Postmates exercises control over its couriers sufficient to render them employees. While couriers decide when to log into the Postmates’ app and accept delivery jobs, the company controls the assignment of deliveries. Customers cannot request a particular worker. The company tracks the courier’s location in real time on the app. Couriers can use a company sponsored card to purchase the customers’ requested items. Postmates handles all complaints and, in some circumstances, retains liability to the customer for incorrect or damaged deliveries.

Also, the couriers’ compensation, which they have no ability to negotiate, is paid by Postmates and Postmates bears the loss when customers do not pay.

“Postmates exercises more than ‘incidental control’ over its couriers—low-paid workers performing unskilled labor who possess limited discretion over how to do their jobs. That the couriers retain some independence to choose their work schedule and delivery route does not mean that they have actual control over their work or the service Postmates provides its customers,” the court wrote.

The court likened the situation to delivery persons who call a dispatcher to get assignments rather than report through an app — they are also employees.

Postmates told Reuters that the ruling showed that New York needs a “modern worker classification framework.”

New York Attorney General Letitia James welcomed the ruling. “The courts have solidified what we all have known for a while — delivery drivers are employees and are entitled to the same unemployment benefits other employees can obtain. As the nation battles the spread of the coronavirus and more and more employees are laid off, Postmates drivers should know they have the same safety net millions of others in New York have today,” she said.

During the current coronavirus pandemic, Uber and Postmates have renewed their call for changes to employment laws to provide some benefits while maintaining workers’ status as independent contractors. The two have also been trying to block a new California law that makes it harder for them to classify their workers as independent contractors rather than employees.

The $2 trillion federal coronavirus relief bill now before Congress includes some unemployment benefits to independent contractors and self-employed persons.