A group of Amazon drivers who are part of the company’s Flex program have been affirmed by Wisconsin’s Supreme Court to be employees rather than independent contractors.
The state’s highest court on Wednesday declined to review an appeals court decision from last April that overturned a lower court decision.
A court in Waukesha County had ruled in favor of Amazon (NYSE: AMZN), which argued that its Flex drivers were independent contractors under state regulations. The Court of Appeals for Wisconsin reversed that lower court ruling and held the drivers were employees under state law.
The Amazon Flex program hires workers (whom Amazon sees as independent contractors) to deliver small packages out of their own cars. There is no Amazon-provided vehicle, and much of the Flex “fleet” is made up of individual automobiles rather than delivery vans.
Immediate issue: unemployment payments
At the root of the case is a decision handed down by the state’s Department of Workforce Development after an audit of Amazon’s activities in 2016-2018. The finding by the department, and then its affirmation by the state’s Labor and Industrial Review Commission (LIRC), had a practical impact of assessing Amazon slightly more than $200,000 in retroactive unemployment fees that the company had not paid for workers it believed were independent contractors.
Where the case fits in more broadly is that the ruling was based on how many tests of Wisconsin’s multipart standard for determining the status of a worker, employee or independent contractor that Amazon could show it had met.
Independent contractor law often turns on a multipronged test that an employer will be judged on in litigation or regulation. The test determines whether a worker is truly independent or is an employee, regardless of whether the employer classifies that worker as independent.
Parallels with federal independent contractor law
The most controversial classification battle of late has been the test in the federal independent contractor law promulgated by the Wage and Hour Division of the Department of Labor. There are six factors in the Biden administration’s rule, many of which deal with the issue of control over a worker’s activities..
The Trump administration rule it replaced was similar in structure, but the Trump rule gave particular weight to two tests: control and the ability of independent contractors to profit from the level of effort and initiative they put into the job.
The Biden rule has been dubbed more of a “totality-of-the-circumstances” rule, with all six factors — and a seventh unspecified step opening the door to a wider interpretation — carrying equal weight. As a result, it is viewed as more likely to lead the Wage and Hour Division to find a worker is an employee rather than an independent contractor.
Wisconsin independent contractor law also has a multipronged test. One of the prongs in turn has nine definitions that deal with issues such as control, ownership of equipment and whether a worker performing a task ostensibly as an independent contractor has that service on offer to others besides the company employing the worker. Those issues are familiar to any observer of other federal or state standards, including the widely used 11-point Borello test.
Gotta have six…
The Wisconsin regulation is also specific: To qualify as an independent contractor, a worker needs to be in compliance with six of the nine definitions.
According to a summary of the case in the appellate court’s decision, LIRC, after getting the case from the Department of Workforce Development, found that Amazon met only one of the tests. Amazon appealed that decision to the Waukesha County Circuit Court, which found that Amazon had met all nine tests.
The appellate court found several of the nine points where Amazon did meet the burden to show a worker is independent. But the court didn’t find six, the magic number in Wisconsin.
For example, in Amazon’s favor was the fact that workers could be shown to be using their own vehicles in fulfilling their duties. The court also found that the costs of operations were borne by the Flex drivers. Those were two tests where Amazon passed, supporting the argument that the Flex drivers could be defined as independent.
But the court also found that Amazon could not show, for example, that the Flex workers had multiple contracts or that they were actively available to offer their delivery services to anyone else, even though wording in the agreement with the drivers says they can do so.
There also is a test that the employee is performing work that does “not directly relate to the employing unit retaining the services.”
This echoes the B prong of the ABC test from California and Massachusetts (where it is codified) and New Jersey (where it is in civil law). That prong says for a worker to be deemed an independent contractor, he or she must be offering services that are “outside the usual course of the hiring entity’s business.”
It is the B prong that has created difficulties for the California trucking industry because trucking companies often hire independent contractors to move freight, the same business the trucking company operates in.
Delivery vs. logistics
“The services provided by the delivery partners were integrated and interwoven into Amazon Logistics’ business of quickly and efficiently shipping Amazon.com’s products to Amazon.com customers,” the appellate court wrote.
The court summed up Amazon’s view that the activities of “delivery partners” in the Flex program “[do] not directly relate to its business because the ‘fundamental nature’ of its business is logistics, not delivery.”
Amazon said it does not offer delivery itself but rather fulfills those delivery needs through a variety of service providers, including the U.S. Postal Service and FedEx (NYSE: FDX). (The companies that deliver using Amazon-branded vehicles are almost always owned and operated by an independent company under contract to Amazon.)
The Wisconsin Supreme Court’s denial of review reverts the case back to the appellate level. In that decision, the court had reversed the Waukesha County order and instructed the lower court to enter an order “consistent with this opinion confirming LIRC’s order,” which requires the payment of the unemployment fees.
But with precedents like this, findings that a worker is an employee rather than an independent contractor can set the ground for litigation regarding a wide variety of issues, including minimum wage payments and workers’ compensation.
The Supreme Court decision to “dismiss as improvidently granted” the Amazon case generally comes with no comment from the court. A “DIG” ruling, as it is known, essentially says that while the Wisconsin Supreme Court decided to accept review of a lower case, it should not have done so and is punting the case back to the lower court.
But in a concurring opinion, Judge Ann Walsh Bradley criticized the court for not offering more details on its reasoning for rejecting further review of the Amazon case. “Without explanation, the court disposes of the case in a two-sentence per curiam decision, dismissing the case as improvidently granted,” she wrote. “Such a dearth of explanation has been the court’s pattern for the past seven years.”
That led to a concurring opinion by Judge Rebecca Grassl Bradley, who said not commenting on the rationale for rejecting review is standard practice, all the way up to and including the U.S. Supreme Court.
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