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The Continuing Struggle to Classify

The Continuing Struggle to Classify "Gig Economy" Workers in New York

One of the biggest ongoing debates in employment law is how to properly classify workers as “employees” or “independent contractors” in the digital economy. The media throws around the term “gig economy” to describe workers who provide services through online platforms. This provides little guidance for judges and state officials who need to decide which of these workers is entitled to important legal propertections and benefits.

Divided Appeals Court Holds Courier was Not an “Employee”

To illustrate this ongoing confusion, a five-judge panel of the Appellate Division, Third Department, recently split 3-2 on the question of whether to classify an online delivery courier as an employee for purposes of New York unemployment insurance law. The claimant in this case worked for a company that offers “on-demand pick-up and delivery service from local restaurants and stores.” After the company terminated its relationship with the claimant, he sought unemployment benefits.

As described in court records, the claimant interacted with the company through a software application. He initially provided his name, telephone number, Social Security number, and driver's license information. The company performed a criminal background check via a third-party contractor, but otherwise did not conduct any formal interview or screening process.

Once approved as a “courier,” the claimant was free to decide whether or not to accept or reject particular delivery assignments. He did not report to a supervisor or need to maintain any regular hours. He was also free to work for other delivery services while logged on to the company's software platform. The company, however, determined the courier's fee, set prices for customers, and handled any consumer complaints.

Based on this and other information, an administrative law judge determined the claimant did not qualify as an “employee.” The Unemployment Insurance Appeal Board later reversed this decision and ordered the company to pay unemployment insurance contributions for the benefit of the claimant. The Third Department then reversed the Appeal Board, holding that the administrative law judge's prior determination was correct.

As the majority explained, there was not “substantial evidence of an employer-employee relationship” between the company and the claimant. More precisely, the claimant could not show the company exercised sufficient “supervision, direction and control” over his work during the time he worked as a courier. As far as the majority was concerned, he was an independent contractor.

Two judges dissented. They noted that the company's business “would not operate without the couriers.” Furthermore, the company did exercise a significant amount of control over the couriers' work. For example, a courier could not use a “substitute for the delivery.” As noted above, the company set all fees and compensation. The company also retained “liability for incorrect or damaged deliveries” and retained the right to “block couriers from logging onto the platform for various reasons.” Although it was a close call, the dissent said there was “substantial evidence” supporting the Unemployment Insurance Appeal Board's classification.

Speak with a New York City Employment Law Attorney Today

Cases like this are highly fact-specific. The divided Third Department opinion will certainly not settle the question of how to classify “gig economy” workers once and for all. If you have questions about whether your working status entitles you to certain protections and need advice from a qualified New York employment law attorney, contact the Law Offices of Nisar Law Group, P.C., today.

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