This originally appeared on the SGR Blog.
“Game Change”: Court Holds “Gig” Courier to be an Employee (Not an Independent Contractor) Entitled to Unemployment Compensation
Will Ruling Retroactively Apply?
In a landmark decision, Matter of Vega (Postmates Inc. Commissioner of Labor)[March26, 2020], the Court of Appeals addressed the question of whether or not a deliveryman—who was free to make his own hours, choose what assignments to take and was also available to work for others—was an employee or an independent contractor. The issue arose in the context of a claim by a courier for unemployment compensation.
Question: Was the decision of the Unemployment Insurance Appeals Board that a former Postmates, Inc. courier, and others similarly-situated, were employees for whom Postmates was required to make contributions to the unemployment insurance fund supported by substantial evidence.
Answer: Yes. There was record support for the Board’s finding that the couriers were employees.
Chief Judge DiFiore for the Court
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—deliveries that are, for the most part, completed within an hour. Postmates solicits and hires its couriers, who undergo background checks before being approved to work by Postmates. Once they are approved, the couriers decide when to log into the application and which delivery jobs to accept. Once a courier accepts a delivery job made available through the application, the courier receives additional information about the job from Postmates, including the destination for the delivery. After completing a job, Postmates pays the couriers 80% of the delivery fees charged to customers and payments are made by the customer directly to Postmates, which pays its couriers even when the fees are not collected from customers. Couriers’ pay and the delivery fee are both nonnegotiable.
Luis Vega worked as a Postmates courier in June 2015. Based on negative reviews from customers alleging fraudulent activity, Postmates blocked him from using the application. Vega filed for unemployment benefits. In August 2015, the Department of Labor, based in part on a statement by Vega, initially determined that he was an employee of Postmates, requiring that Postmates pay unemployment insurance contributions on his earnings, as well as on the earnings of “all other persons similarly employed.” Postmates disputed the determination.
A hearing was held before an administrative law judge (ALJ) who sustained Postmates’ objection, concluding that Vega was an independent contractor and reasoning that Postmates did not exercise sufficient supervision, direction and control over him to establish an employer-employee relationship. The Commissioner appealed the ALJ’s decision to the Board, which reversed the ALJ, overruled Postmates’ objection and sustained the Department’s initial determination that Vega was an employee. After making findings of fact regarding the operation and logistics of Postmates’ delivery business, the Board concluded that “claimant and any other on-demand couriers (delivery drivers) similarly situated” were employees because Postmates exercised, or reserved the right to exercise, control over their services.”
Postmates appealed to the Appellate Division. With two Justices dissenting, the Appellate Division reversed the Board’s determination and remitted the matter to the Board for further proceedings not inconsistent with the court’s decision. The Appellate Division concluded that “[w]hile proof was submitted with respect to Postmates’ incidental control over the couriers,” the proof “d[id] not constitute substantial evidence of an employer-employee relationship to the extent that it fail[ed] to provide sufficient indicia of Postmates’ control over the means by which these couriers perform their work”. The dissenting Justices would have confirmed the Board’s decision, concluding that there was substantial evidence supporting its determination that Vega was an employee of Postmates. The Commissioner appealed.
Under the Labor Law, “employment” is broadly defined as “any service under any contract of employment for hire, express or implied, written, or oral”. The Board considers a number of factors in determining whether a worker is an employee or an independent contractor, examining “[a]ll aspects of the arrangement” . But the touchstone of the analysis is whether the employer exercised control over the results produced by the worker or the means used to achieve the results . The doctrine is flexible because no enumerated list of factors applies to every situation faced by a worker—and the relevant indicia of control will necessarily vary depending on the nature of the work.
The Court of Appeals found that there was substantial evidence in the record to support the Board’s determination that Postmates exercised control over its couriers sufficient to render them employees rather than independent contractors operating their own businesses.
The company operates through Postmates’ digital platform, accessed via smartphone app, which connects customers to Postmates couriers, without whom the company could not operate. While couriers decide when to log into the Postmates’ app and accept delivery jobs, the company controls the assignment of deliveries by determining which couriers have access to possible delivery jobs. Postmates informs couriers where requested goods are to be delivered only after a courier has accepted the assignment. Customers cannot request that the job be performed by a particular worker. In the event a courier becomes unavailable after accepting a job, Postmates—not the courier—finds a replacement. Although Postmates does not dictate the exact routes couriers must take between the pick-up and delivery locations, the company tracks courier location during deliveries in real time on the omnipresent app, providing customers an estimated time of arrival for their deliveries. The couriers’ compensation, which the company unilaterally fixes and the couriers have no ability to negotiate, are paid to the couriers by Postmates. Postmates, not its couriers, bears the loss when customers do not pay. Because the total fee charged by Postmates is based solely on the distance of the delivery and couriers are not given that information in advance, they are unable to determine their share until after accepting a job. Further, Postmates unilaterally sets the delivery fees, for which it bills the customers directly through the app. Couriers receive a company sponsored “PEX” card which they may use to purchase the customers’ requested items, when necessary. Postmates handles all customer complaints and, in some circumstances, retains liability to the customer for incorrect or damaged deliveries.
Postmates exercised more than “incidental control” over its couriers—low-paid workers performing unskilled labor who possessed limited discretion over how to do their jobs. That the couriers retained some independence to choose their work schedule and delivery route did not mean that they have actual control over their work or the service Postmates provides its customers. And there was substantial evidence for the Board’s conclusion that Postmates dominated 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.
Accordingly, the order of the Appellate Division was reversed and the decision of the Board finding that Vega was an employee was reinstated.
Justice Rivera concurred in the result.
“Couriers” do not have an exclusive employment contract with Postmates, but being able to work simultaneously for another employer does not make a courier an independent businessperson. Couriers cannot build a client-base through their business savvy; apart from the moment of delivery. Customer contact is through Postmates. And customers do not choose a delivery person. Nor does the work lend itself to the “exercise of entrepreneurial control over important business decisions” . The model depends on a courier not providing the same services as an independent businessperson.
Judge Wilson dissented:
The majority’s opinion failed to examine the record to determine that the findings of the Commissioner of Labor were supported by substantial evidence. Many of those findings were so lacking in support as to appear to have been cut and pasted from the decision in some other matter, or from a form list of all the possible factors that might warrant the conclusion that someone was an employee. Under those circumstances, reversal was required.
The majority also failed to recognize that the realities of the contemporary working world have outpaced existing jurisprudence. The multitude of factors identified in caselaw as pertinent to determining whether a claimant is an employee or independent contractor was “reflective of a time when employees received a gold watch upon retiring from the sole company at which they spent their entire careers.”
Anyone can download the Postmates Fleet app to become a courier for Postmates, so long as s/he passed a criminal background check. And could make Postmates deliveries when and where s/he pleased, and extemporaneously indicate his/her availability. And could make my deliveries in any manner.
Vega made his own schedule, was paid only for deliveries he made, could work and perform deliveries for other companies even while making deliveries for Postmates, and was not required to attend meetings or trainings. Vega did not have to work on a prearranged schedule. And Vega did not have to work at his employer’s place of business.
Vega’s brief work as a courier neatly fit into the exertion of mere “incidental control,” which did not provide substantial evidence for a Board’s determination of employee status. Vega retained more than just some independence to choose his work schedule and delivery route. He had complete control over his schedule, the hours he logged on, the jobs he accepted or rejected (or rejected even after accepting them), and the routes he took when, having accepted a job, he actually made the promised delivery.
The common-law test for status as an employee was developed in a vastly different time. The number of workers performing multiple or alternative jobs has grown dramatically. New technology and the rise of the sharing economy have driven further changes, including the crowdsourcing of flexible and low-barrier-to-entry jobs upon which many workers are less reliant than the traditional notion of career employees.
Although it is well within the purview of the courts to alter a common-law test, that is best done incrementally. The complete overhaul of our common-law employment test to adapt it to the present and future economy is not a task to which courts are well suited. Whether, to what degree, and on what basis to provide unemployment benefits to Postmates couriers generally, or to other workers in the gig economy, is a policy question best left to the legislature.
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“Get Out of Jail Free Card”: Court Narrowly Construes Judiciary Law
Attorney Navigates Charges of Negligence, Incompetence and Deception
In a recent decision, Bill Birds, Inc. v. The Stein Law Firm, P.C. (March 31, 2020), the Court addressed the question of whether an attorneys alleged misconduct constituted criminality that was actionable in a civil lawsuit by a former cleint.
Chief Judge DiFiore for the Court:
Question: Did the Appellate Division properly dismiss claims under Judiciary Law § 487 (1) by Bill Birds, Inc. and other against Mitchell Stein and his law firm, their former attorneys, who allegedly induced them to bring a meritless lawsuit in order to generate a legal fee.
Answer: Mitchell met the initial burden on summary judgment with respect to whether the alleged deceit occurred during the pendency of litigation and Bill Birds failed to raise a triable issue of fact on that issue in response.
Stein represented Bill Birds, which manufactures decorative metal automobile parts, and its president, in a trademark dispute against General Motors and Equity Management, Inc. After the complaint in that action was dismissed, Bill Birds filed suit against Stein and his firm on various grounds, including violation of Judiciary Law § 487(1).
Stein advised that GM had possibly abandoned the trademarks GM had licensed to Bill Birds for over a decade, and that there was a meritorious claims against GM. Based on that advice, Bill Birds filed the underlying federal trademark action against GM and EMI in the United States District Court for the Eastern District of New York, incurring $25,000 in attorney fees.
Bill Birds alleged that the underlying action—which was dismissed as commenced in an improper venue based on a forum selection clause in the licensing agreements with GM—clearly lacked merit because a provision in the licensing agreement prohibited challenging GM’s ownership of the intellectual property. Bill Birds further alleged that Stein concealed the dismissal of the underlying action for approximately nine months and subsequently lied about the reason for the delay, claiming that the federal court did not release its decision promptly.
After answering the complaint, Stein and his firm moved for summary judgment, arguing that the Judiciary Law § 487 claim should be dismissed because Bill Birds failed to allege any misrepresentations made in the context of ongoing litigation. Bill Birds opposed the motion, submitting affidavits alleging essentially the same conduct described in the complaint. In addition, Bill Birds submitted an expert affidavit from an attorney who stated that Stein’s legal advice regarding GM’s rights to the licensed trademarks was incorrect and that Bill Birds was induced into litigation under “false pretenses.”
Supreme Court granted Stein’s motion for summary judgment dismissing the legal malpractice, breach of contract and fraud claims, but denied the motion with respect to the Section 487 claim, concluding that Bill Bird’s expert affidavit raised triable issues of fact.
Stein appealed. The Appellate Division reversed and dismissed the complaint in its entirety. Reasoning that Bill Birds failed to allege that Stein intended to deceive the court or any party, as required by Section 487.
Under Judiciary Law § 487(1), an attorney “who[ i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party” is guilty of a misdemeanor and may be liable to the injured party for treble damages in a civil action.
Judiciary Law § 487—covering intentional deceit and collusion—imposes liability for knowingly making false statements. with scienter. But Section 487 was not a codification of common law fraud and therefore did not require a showing of justifiable reliance. In other words, liability under the statute does not depend on whether the court or party to whom the statement is made is actually misled by the attorney’s intentional false statement. Given the requirement that the conduct involve “deceit or collusion” and be intentional, liability under the statute did not extend to negligent acts or conduct that constitutes only legal malpractice, evincing a lack of professional competency.
Here, viewing the facts in the light most favorable to Bill Birds, Stein and his firm established prima facie entitlement to judgment as a matter of law on the Judiciary Law § 487 (1) claim by demonstrating that Bill Birds failed to allege that Stein engaged in deceit or collusion during the course of the underlying federal intellectual property lawsuit against GM and EMI.
In response, Bill Birds failed to satisfy the burden of establishing material, triable issues of fact. The affidavits submitted in opposition to summary judgment did not allege that Stein committed any acts of deceit or collusion during the pendency of the underlying federal lawsuit. To the extent it was alleged that deceitful statements were made, the allegation that Stein induced the filing of meritless lawsuit based on misleading legal advice preceding commencement of the lawsuit was insufficient to state a viable attorney deceit claim. The statute did not encompass the filing of a pleading or brief containing nonmeritorious legal arguments, as such statements could not support a claim under the statute. Similarly, even assuming it constituted deceit or collusion, Stein’s alleged months-long delay in informing Bill Birds that their federal lawsuit had been dismissed occurred after the litigation had ended and therefore fell outside the scope of Judiciary Law § 487 (1). Thus, Bill Bird’s Judiciary Law § 487 cause of action was properly dismissed.
Justice Rivera dissented:
Bill Birds alleged that Stein induced pursuit of a frivolous lawsuit for the sole purpose of charging thousands of dollars in legal fees and with counsel’s full knowledge ab initio that the claims were meritless. An attorney may be liable for common-law fraud against a client, but when the conduct includes deceit on the court or a party in a pending lawsuit, the attorney is separately guilty of a misdemeanor and liable for enhanced civil damages under Judiciary Law § 487.
According to Bill Birds, Stein intentionally, and without regard to the ultimate outcome, perpetuated a charade on the court and his client by filing and pursuing what the attorney knew all along was a meritless action—one doomed to fail—which caused the payment to their the attorney of unwarranted legal fees.
Judge Rivera dissented because Bill Birds’ cause of action for attorney deceit was improperly dismissed on summary judgment as it asserted a viable legal theory and there existed triable issues of fact as to whether the alleged deceit caused any damages.
Bill Birds’ sole contention was that their Judiciary Law cause of action was wrongly dismissed on summary judgment because there were triable issues of fact regarding Stein’s alleged deceit. In response, Stein argued that, as a matter of law, section 487 did not apply to prelitigation statements and acts, and Bill Birds could not establish any damages caused by Stein’s alleged misconduct.
Judge Rivera would have reversed the Appellate Division because Bill Birds stated a viable cause of action under Judiciary Law § 487 for post-filing misconduct and there existed triable and actual issues whether Stein intended to deceive the court and Bill Birds by knowingly filing and defending a frivolous lawsuit and, if so, whether Bill Birds suffered damages as a result.
Judiciary Law § 487 encompasses attorney deceit in the form of filing and pursing a knowing frivolous lawsuit. And, contrary to Stein’s view, adopted by the majority (majority op at 1), Bird Bills” complaint was not limited to mere prelitigation conduct, but rather asserted that Stein made initial and continued false representations to the court about the legal and factual basis for the federal action in the federal complaint and in opposition to the motion to dismiss. Viewed in the light most favorable to Bird Bills the complaint asserted that the federal lawsuit against GM had no legal basis and was grounded in a material misrepresentation of fact—that Bird Bills had superior rights and thus should prevail.
The documents submitted in opposition to summary judgment, provided further support for a finding that Stein’s filing and litigation posture evinced an orchestrated scheme to charge legal fees for an action that the attorneys knew to be frivolous.
The majority missed the mark by concluding that there was no meaningful distinction between attorney conduct that leads to an unnecessary lawsuit and a frivolous lawsuit, like that alleged by Bill Birds. An attorney who files a frivolous lawsuit with full knowledge that the action is groundless and nevertheless intends to deceive the court as to the viability of the claims to achieve the nonlegitimate end of solely charging legal fees, commits a deceit that imperils the integrity of the courts and undermines their truth-seeking function.
Bill Birds presented evidence in opposition to Stein’s motion sufficient to show a viable cause of action under Judiciary Law § 487, and triable issues of facts remained as to whether Stein intended to practice a deceit on the court or Bill Birds that proximately caused damages in the form of unwarranted legal fees.