Postmates Delivery Workers Are Not Employees – Says New York Appellate court

New York, NY (Law Firm Newswire) June 26, 2018 – On Thursday, June 21, 2018 New York’s Third Judicial Department held that couriers for the web-based delivery service are independent contractors – not employees. In doing so, the court overturned the New York Unemployment Insurance Appeal Board’s (NYUIAB) decision on this issue and handed business a major win. The case is In the Matter of the Claim of Luis A. Vega.

Several factors led the court to this decision: that the workers work without much oversight from Postmates; that they do not have to apply for a job; that they set their own work schedule; and they choose their own means of delivering customer orders. After heavily weighing these factors, the court gave little weight to other factors, stating “The fact that Postmates determines the fee to be charged, determines the rate to be paid, tracks the subject deliveries in real time and handles customer complaints … does not constitute substantial evidence of an employer-employee relationship.”

By way of background, the worker at issue (Vega) sought unemployment benefits after Postmates ended its relationship with him based on customers’ poor feedback about him, including possible fraud. An administrative law judge rejected his application, but the Appeal Board reversed that decision.

Besides not being entitled to unemployment benefits, holding a worker is an independent contractor, versus an employee, means that individual is not entitled to overtime, a minimum wage and other protections under the New York Labor Law and Fair Labor Standards Act.

This ruling is the latest on the employee status in the on-demand/gig economy and it comes a few months after the Northern District of California ruled that a delivery driver for food delivery service GrubHub in California was an independent contractor, not an employee. The California Supreme Court has since adopted a new classification analysis that presumes workers are employees, joining a handful of states that use the so-called ABC test.

The ABC test presumes that all workers are employees unless a business shows the worker is free from supervision, performs work that is outside the usual course or place of business and works “in an independently established trade, occupation or business of the same nature” as the work they do for the entity that is hiring them. This is similar to how the Fair Labor Standards Act (FLSA) approaches whether an employee is entitled to overtime: it presumes all workers are entitled to overtime and then carves out exemptions.

While an important decision, the Third Judicial Department’s decision is not binding on the rest of the state. This means other courts may hold that these workers are employees and are thereby entitled to overtime. The issue of whether delivery drivers in the gig economy are entitled to overtime will continue to be debated.

Douglas Lipsky is a co-founding partner of Lipsky Lowe, LLP, an employment law firm in New York City.