State Supreme Court Hears Arguments on ‘Gig Workers’

The state’s highest court grappled Tuesday with how to determine whether a group of Wisconsin delivery drivers are employees who can get jobless pay if they are let go or if they can be treated as independent contractors outside the unemployment insurance system.

The case on Tuesday’s court docket focused on a specific company, the online retail giant Amazon, and a specific group of workers. But it is part of a much broader trend — the emergence of part-time “gig work” carried out by people who get hired moment to moment by the push of a button, typically on a smartphone app, to transport passengers, deliver groceries or restaurant meals or undertake a wide range of tasks.

“I don’t recall our state having tackled the issue of independent contractor status with respect to the emerging economy of gig employees who basically use their own smartphones, their own vehicles, to perform services, perhaps for several different companies,” said Chief Justice Annette Ziegler midway through the presentation by Amazon’s lawyer.

Worker advocates are watching the case closely.

“The rights and protections to which employees are entitled are the product of many years of struggle by the labor movement,” Wisconsin AFL-CIO president Stephanie Bloomingdale said in a statement Monday. “These rights must not be stripped away simply because the modalities of doing business have changed. Denying workers our rightful status as employees undermines Wisconsin’s proud history as a leader in employment law and turns back the clock to a darker era for working people.”

The road to the high court

The Amazon delivery drivers at the center of Tuesday’s arguments deliver packages to customers’ homes — the last leg of travel for goods shipped from Amazon warehouses across the country.

Amazon’s delivery subsidiary, Amazon Logistics, calls them “delivery partners” and has declared them independent contractors. Participants in the program use the Amazon Flex phone app to sign up for two- or four-hour blocks of time in which they deliver a bundle of packages along a route prescribed by the app. They make the deliveries in their personal vehicles.

After Amazon Logistics ejected one participant from the program in 2017, he signed up for unemployment insurance (UI). Independent contractors don’t qualify for UI, but the Department of Workforce Development (DWD), which administers the UI system, conducted an audit of the delivery partner program.

The audit concluded that out of more than 1,000 delivery partners, two were established delivery companies. The DWD auditor sent questionnaires to about 100 more, and after reviewing the responses, concluded that the vast majority of individual drivers didn’t qualify as independent contractors under Wisconsin law.

“Amazon Logistics has not shown that any of these drivers had independent businesses,” Ryan X. Farrell, the lawyer for DWD, told the justices Tuesday.

DWD told Amazon in 2018 that the company owed Wisconsin more than $205,436 in unemployment insurance premiums. The company appealed.

“This case is not only about protecting unemployed workers from economic uncertainties,” Farrell said. “It’s also about maintaining a level playing field for all Wisconsin businesses. When Wisconsin businesses misclassify their workers, they gain an unfair competitive advantage against their competitors.”

The state statute that governs whether a worker is an independent contractor or an employee requires two steps. The first is a five-part test to establish whether the worker is sufficiently free from the employer’s control while doing the work.

The second step is a nine-part test to assess how independent the worker is financially from the employer and how much the position requires the worker to be an entrepreneur. The job must meet at least six of the nine conditions to be considered a genuine independent contract position under the law.

After a hearing an administrative law judge largely agreed with DWD. While the delivery driver jobs met four of the five tests for being free of control by the employer, that judge found delivery drivers only met one qualification for independence and entrepreneurship. On the other eight qualifications Amazon fell short, the administrative judge concluded.

LIRC was the next stop in the legal process. The commission agreed with the administrative law judge that Amazon flunked eight of the nine tests for independence. But the judge and LIRC disagreed on which one the company passed.

The administrative law judge said an Amazon requirement for drivers to indemnify the company for unsatisfactory work met a standard in the law, which says a worker could be considered an independent contractor if required to redo unsatisfactory work for no added pay.

LIRC said that standard had not been met, however. Instead, the commissioners decided, Amazon met a different one of the nine tests: showing that drivers incurred “the main expenses related to the services” performed.

A Waukesha County circuit judge threw out the LIRC decision, ruling that the Amazon drivers met all nine economic independence and entrepreneurship tests and declaring the drivers were independent contractors.

In April, the Wisconsin Appeals Court District 4 reversed the lower court, once again declaring the drivers to be employees. The Amazon drivers met five of the nine conditions for independence, the judges ruled — but that was one short of the minimum of six to be considered an independent contractor.

Weight and evidence

Part of Tuesday’s oral arguments focused on how much weight the courts, from the circuit court up to the Supreme Court, should give to LIRC’s own analysis in its review of the case.

In a 2018 ruling the Court declared it would no longer “defer” to an administrative agency’s legal analysis, but instead would give that “due weight” in reviewing agency decisions.

“This is a question about statutory interpretation, on which this Court is just as much, if not more, of an expert than the agency,” said Amazon’s attorney, Michael Kenneally.

“I understand your argument to be simply that you’re asking this court to do its job to interpret and apply a statute,” Justice Rebecca Bradley told Kenneally. “So regardless of whether we find the agency’s conclusions of law persuasive or not, we still have to conduct an independent review as the Supreme Court of Wisconsin, right?”

Kenneally agreed.

LIRC attorney Jennifer Carter told the justices that under the 2018 ruling, “as a matter of persuasion, the courts will give due weight to the experience, technical competence and specialized knowledge of an administrative agency as it reviews that agency’s decisions.”

The commission’s long history gives it a deep well of knowledge to draw from, Carter said. LIRC “has interpreted the definition of employee for decades, going back to the beginning of the UI program,” with its decisions informing revisions in unemployment law. That, she said, is “certainly experience and expertise that the court should rely on.”

Justice Ann Walsh Bradley noted how differently the administrative law judge, LIRC, the circuit court and the appeals court tribunals had assessed whether the Amazon jobs had passed the nine tests for independence and entrepreneurship.

“When you go from one to five to nine, in terms of whether or not Amazon carried its burden … it concerns me,” she said. “There seems to be a lot of subjectivity.”

Farrell said that over the history of the UI system, “the consistent holding from the courts is when there’s ambiguity, the directive is that the court finds broad coverage for unemployed workers.”

Other arguments drilled into how much evidence was necessary in the original administrative hearing to uphold DWD’s or the company’s claims.

The only driver to testify in the original case was the one who had filed for UI, and who testified that Amazon was the only company that he provided delivery services for.

Justice Rebecca Bradley suggested that to declare all the rest of the delivery partners to not be independent contractors “would have required either testimony from each of the 1,000 individuals or some admissible evidence with respect to each of these individuals.”

Farrell said that Amazon failed to produce any evidence refuting DWD’s conclusions, such as calling workers who could support the company’s claims as witnesses to testify that they provided driving and delivery services for clients other than Amazon. Instead, he said, the company only called as witnesses “managers who speculated as to how the drivers operated.”

Ziegler asked Farrell whether having two jobs would make someone an independent contractor.

“It’s whether they have a bona fide independent business separate and apart from the employing unit,” Farrell replied. For the drivers “there was nothing in the record to show that they did.”

State Supreme Court hears arguments for, against treating Amazon delivery drivers as employees was originally published by the Wisconsin Examiner.