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Authorities Rule That Thousands of Couriers Are Employees, Not Independent Contractors

On Behalf of | Aug 22, 2018 | Workers' Compensation

One estimate suggests that by 2020, 43 percent of the American workforce will consist of independent contractors.

Sometimes, workers suffer injuries only to find that they do not have coverage under the state’s workers compensation system. Coverage often hinges on whether a worker is legally an employee or an independent contractor.

In today’s “gig economy,” numerous tech startups base their business models on classifying people as contract workers rather than employees. In doing so, some may avoid their responsibilities under state workers’ compensation laws.

A recent controversy over couriers delivering food illustrates the some of the challenges.

Case Study Involving Couriers

A number of couriers filed workers’ comp claims after they were injured making deliveries for San Francisco-based Postmates. The company did not cover the couriers under its workers’ comp policy, claiming the couriers were independent contractors rather than employees.

Pay Back Premiums and Fine

According to GeekWire, Washington’s Department of Labor & Industries (L&I) ultimately ruled that the couriers were employees, ordering Postmates to retroactively pay two years’ worth of workers comp premiums for more than 3,000 couriers.

For the period July 2013 to December 2015, L&I identified approximately $320,000 in “audited” workers compensation insurance premiums pertaining to 3,011 couriers. Postmates was also fined $75,000 for inadequate record keeping regarding the couriers’ work activities.

As an L&I spokesperson put it, “Our auditors looked at these couriers and what they did and found they should have been recorded as employees.”

Company Responds

GeekWire reports that Postmates is appealing the rulings. Postmates disputes assertions that its couriers are employees, citing the freedom they have in accepting and performing deliveries. In response to the L&I audit, an attorney for the startup asserts it “is a technology company,” and “not a delivery service.” If Postmates loses the appeal, it may consider taking the dispute to court.

The company further argues that its app merely creates a “marketplace” that brings customers and couriers together. Since each courier provides his/her own transportation, the company does not control them. The company claims it is losing money and it expects to lose more money until 2018 or beyond. However, recently it received $141 million in additional funding according to Bloomberg.

History of Independent Contractor Disputes

For its story, GeekWire interviewed Michael Duff, a former attorney with the National Labor Relations Board (NLRB) that is now a law professor at the University of Wyoming. He has extensive experience questioning individuals to determine if they were employees or independent contractors. The amount of control a company exerts over individuals typically determines employee or independent contractor status.

Duff suggests that such determinations will get more complicated as new technologies alter traditional working arrangements. However, he also suggests that companies have long tried to skirt the rules to save money. He says, “… the simple truth is that employers don’t want to pay taxes, or support the regulatory structure if they don’t have to.”

Rapid changes in the way work is done have a host of local, state and federal agencies and regulators re-examining laws and rules regarding workers’ compensation.

The main consideration in determining whether a worker is an employee or an independent contractor is whether the employer directs and controls the means and manner of the employee’s performance. Two Minnesota Rules govern the factors the Court considers when deciding if a worker is an employee or independent contractor. An employer may wrongly consider you an independent contractor when you’re an employee. This occurs often in construction, delivery and hired professional trades. Even student-athletes who lose scholarships as a result of an athletic injury are arguably employees. When you suffer an injury on the job in Minnesota, it is important that you receive any and all benefits you are entitled to under the law. Ultimately, a judge decides who is covered, not an employer or company.

When workers comp benefits are at stake, it is important to file a claim in a timely manner. Our firm provides an initial consultation with a workers compensation attorney at no cost to you. To learn more, please contact us.