Gig economy shake-up: NY court says 'app-based' workers are employees

ALBANY — New York’s top court on Thursday ruled that “app-based” workers are, in fact, employees and not self-employed independent contractors — a ruling that could shake up the so-called gig economy.

The 5-2 decision revolved around a former worker for Postmates, an online service that uses couriers to deliver food or merchandise. But the ruling could apply widely to an array of businesses that deploy workers via computer application programs, such as Uber and Lyft, that use courier-style models.

At issue was a lawsuit brought by Louis A. Vega, who worked as a Postmates courier for one week before being fired because of customer complaints, according to court records. His status as employee or independent contractor became a legal test when he applied for unemployment benefits.

Postmates said Vega wasn’t entitled to benefits because he was a contract worker. Though a midlevel court agreed with the company, New York’s top court overturned that decision.

In doing so, the New York State Court of Appeals reinstated a determination by the state’s Unemployment Insurance Appeal Board that Vega was essentially a Postmates employee and the company was responsible for making unemployment insurance contributions for him.

Chief Judge Janet DiFiore, writing for the court, said Vega was an employee because Postmates controlled all the aspects of his duties.

“Customers cannot choose, nor do they have reason to choose, a particular individual to perform the delivery and thus … Postmates’ couriers do not have the ability to create a following or generate their own customer base,” DiFiore wrote. “Instead, Postmates has complete control over the means by which it obtains customers, how the customer is connected to the delivery person, and whether and how its couriers are compensated. Therefore, there is record support for the Board’s conclusion that Postmates exercised more than incidental control over the couriers.”

Labor unions cheered the ruling.

 “The Court of Appeals has confirmed what we have said all along — app-based employers have been misclassifying workers and denying them their rights for no other reason than their own bottom line,” Mario Cilento, president of the state chapter of the AFL-CIO, said.

Gaining employee status means access to an array of benefits for workers, as well as increasing companies' liablilties.

The union said the ruling should apply to other drivers and couriers hired by app-based companies, such as Uber, DoorDash and GrubHub.

During oral arguments in the case in February, an attorney for Postmates said it was not an employer but merely an app that matched up customers with self-employed couriers.

“Even a cursory look at Postmates’s structure reveals the fallacy of this argument,” Judge Jenny Rivera wrote, in concurring with DiFiore.

 On Thursday, the company said while it disagreed with the majority opinion, the dissenting judges pointed out a need for the state to develop a new, "modern worker classification framework."

Said Postmates spokeswoman Ashley De Smeth: "We fully support designing a responsible framework that allows New Yorkers to choose if, when, where, and for how long they work, while also providing them access to the benefits and services they deserve."