Why it matters

In a decision with implications for the gig economy, a New York appellate court found that a driver for an app-based food delivery service is an independent contractor and not an employee. Luis Vega, a former delivery courier for Postmates, a food delivery service in Brooklyn, Manhattan and Queens, applied for unemployment insurance benefits after he was terminated. An administrative law judge denied the request, but the Unemployment Insurance Appeal Board reversed, determining that an employer/employee relationship existed between Postmates and Vega. The state court appellate panel reversed again, pointing to several factors that led to the conclusion he was an independent contractor. To work for the company, Vega only had to download the app and provide certain information, the court said, with no application or interview required. Nor did he report to a supervisor. Vega had “unfettered discretion” as to whether he even had to work, with total control over his schedule. “While proof was submitted with respect to Postmates’ incidental control over the couriers, 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 consumer complaints…does not constitute substantial evidence of an employer/employee relationship,” the court said.

Detailed discussion

Postmates Inc. operates a web-based platform that allows customers to request on-demand pickup and delivery service from local restaurants or stores. In order to work for the company, individuals download Postmates’ app and provide a name, telephone number, Social Security number and driver’s license number. No application and no interview are required.

The company obtains a criminal background check from a third-party provider and offers an orientation session on how to utilize the app, but drivers are not required to report to a supervisor, and they have the discretion as to whether to ever log on to the app and work. When drivers do log on, they are free to work as much or as little as they want and may even decline or ignore a delivery request without penalty.

Drivers are also allowed to choose the mode of transportation they wish to use for deliveries, provide and maintain their own transportation, and choose the route they wish to take for the delivery. Uniforms are not required, drivers are not provided with any identification card or logo, and they may work for competitors.

Luis Vega worked as a courier for Postmates. After the company terminated him based on alleged negative consumer feedback and/or fraudulent activity, he applied for unemployment insurance benefits. An administrative law judge denied the benefits, but the Unemployment Insurance Appeal Board reversed, finding that an employer/employee relationship existed between Vega and Postmates.

A panel of the New York Appellate Division disagreed.

“While proof was submitted with respect to Postmates’ incidental control over the couriers, including, among other things, 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, in our view, such proof does not constitute substantial evidence of an employer/employee relationship to the extent that it fails to provide sufficient indicia of Postmates’ control over the means by which these couriers perform their work,” the court wrote.

“Thus, on the record before us, we find that the Board’s decision is not supported by substantial evidence as the relationship between claimant and Postmates lacks the requisite indicia of supervision, direction and control necessary to establish an employer/employee relationship.”

Two members of the panel dissented. Referencing the criminal background checks, the reloadable credit card provided to couriers in the event a customer requests an additional purchase, and the fact that Postmates sets the fees, handles customer complaints and acknowledged that the business would not operate without the couriers, the dissent found substantial evidence in support of the board’s decision.

To read the memorandum and order in In re Vega, click here.