By Jacob Peeples

On October 4, 2016, drivers for Amazon.com and Amazon Logistics Inc. filed a class-action lawsuit in federal court alleging that both companies had violated federal labor law by classifying the drivers as independent contractors rather than employees. The drivers named in the lawsuit had all used a smartphone app called “Amazon Flex,” through which drivers can design a schedule by choosing what shifts they work.[1] The lawsuit poses a question as to how individuals who work in the rapidly growing ‘gig economy’ should be classified.

The distinction between employees and independent contractors is more than just a line on a business card. Employees are entitled to receive “federal and state tax withholding[s], fringe benefit[s], anti-discrimination [benefits], health care, pension[s], worker’s compensation, and unemployment insurance” that independent contractors are not.[2] Because of the enormous costs associated with these obligations, companies have huge incentives to classify their workers as independent contractors.

This class-action lawsuit follows a recent string of similar cases that demonstrate a need for clearer, updated standards on what distinguishes employee and non-employee agents. In 2014, the Ninth Circuit Court of Appeals found that drivers for FedEx Ground were employees and not independent contractors.[3] To come to this conclusion, the court used a “right-to-control test” and reasoned that FedEx could, and did, control the appearance of its drivers and their vehicles because they required the drivers to wear specific clothing from their “hats down to their shoes and socks.”[4] FedEx also controlled specified service areas and told drivers where to deliver packages.[5] The court found that this “right-to-control test” was the most important factor, and the other factors did not strongly favor either employee or contractor status.[6]

The Amazon drivers claim that Amazon.com Inc. has violated the federal Fair Labor Standard Act by “failing to assure [drivers] receive minimum wage, after accounting for necessary business expenses that the drivers must pay such as gas and car maintenance, as well as failing to pay overtime for hours worked in excess of forty per week.”[7] Amazon’s spokesperson, Kelly Cheeseman, has responded to this claim by stating, “[w]ith Amazon Flex, anyone can earn up to $25 per hour by delivering packages when and where they want . . . [Amazon] launched the program last year and feedback from Flex drivers has been very positive – they really enjoy being their own boss.”[8]

The drivers’ claim reflects the “right-to-control” standard by asserting that they are employees because they are highly supervised, provided training, and can be fired at will. They also point to the fact that Amazon controls the routes, the order of the deliveries, and that the drivers are indistinguishable from other employees.[9] If the court follows the same “right-to-control test” as Alexander v. FedEx Ground Package Systems[10] it seems unlikely that these drivers will be classified as employees. Unlike the FedEx drivers, Amazon drivers are not required to wear any specific uniform and can use their own unmarked cars.[11]

The outcome of this case will have a large impact on ‘gig economy’ companies and the people they hire. If these drivers are considered employees, the court will be setting a very low standard for employment status, and virtually every person who works for a company through an app will be entitled to employee protections. This could drastically affect the operating costs of said businesses. If the court does draw the line at clothing and branding, it may create a shift in how app based employers run their businesses by discouraging the use of branding with their workers. There have already been complaints about the use of a plainclothes delivery force,[12] so this may not be a good public policy decision.

If the court creates a new standard for employment status unlike the one set in Alexander, it may further obscure the line of what qualifies a worker to be considered an employee. As the types of available jobs change, the law needs to provide guidance to employers and workers on what they can expect. Given the proliferation of ‘gig economy’ jobs, what should the new standard be for determining employment status?

[1] Erica S. Phillips, Delivery Drivers Sue Amazon, Alleging Violation of Labor Laws, Wall St. J., https://www.wsj.com/articles/delivery-drivers-sue-amazon-alleging-violation-of-labor-laws-1475714956 (last updated Oct. 6, 2016, 8:14 AM).

[2] Robert W. Wood, FedEx Misclassified Drivers As Independent Contractors, Rules Ninth Circuit, Forbes, (Aug. 27, 2014, 7:16 PM), https://www.forbes.com/sites/robertwood/2014/08/27/fedex-misclassified-drivers-as-independent-contractors-rules-ninth-circuit/#4c76745179cf.

[3] Alexander v. FedEx Ground Package Sys., 765 F.3d 981, 997 (9th Cir. 2014).

[4] Id. at 990.

[5] Id.

[6] Id. at 997.

[7] Martha C. White, Amazon Drivers Sue for Not Being Paid As Employees, Time: Money, https://time.com/money/4520097/amazon-driver-suit/ (last updated Oct. 5, 2016, 5:56 PM)

[8] Id.

[9] Ángel González, Amazon Delivery Drivers Sue Company Over Job Status, The Seattle Times, https://www.seattletimes.com/business/amazon/amazon-delivery-drivers-sue-company-over-job-status/ (last updated Oct. 5, 2016, 7:36 PM)

[10] 765 F.3d at 990.

[11] Kat Tretina, How You Can Earn $18 to $25 an Hour With Amazon Flex, Wisebread (Aug. 17, 2006), https://www.wisebread.com/how-you-can-earn-18-to-25-an-hour-with-amazon-flex.

[12] Kate Cox, What’s Going On When Your Amazon Package Gets Delivered By Some Guy In A Sedan, Consumerist (Jul. 5, 2016, 10:59 AM) https://consumerist.com/2016/07/05/whats-going-on-when-your-amazon-package-gets-delivered-by-some-guy-in-a-sedan/.