State of New York Labor Decision to Reclassify 1099 Drivers as Independent Contractors

August 19, 2021

The New York Department of Labor issued the initial holding that Distribution Cooperative Network (“DCN”) was liable for paying tax contributions and benefits to delivery drivers, as they were classified employees. The employer appealed to the Administrative Law Judge, who overruled the initial determination and reclassified delivery drivers of cooperatives as independent contractors.

The claimant was employed as a delivery driver for DCN and made deliveries for DCN clients. When DCN has clients who need drivers, DCN posts on a social media site that they are seeking drivers in a particular area. A potential driver would then go to DCN’s website and complete a questionnaire. Upon completion of the questionnaire, the driver must purchase one share of stock, joining the corporation. DCN does not interview, perform background checks, or verify DMV records for any potential driver unless a client requests. DCN provides no training or supervision to the driver. The drivers use their own vehicles and are responsible for maintaining the vehicles and proper insurance. DCN does not deduct federal, state, or local taxes from drivers’ compensation.

Whether an individual is deemed an employee, or an independent contractor is based on the degree of supervision, direction, and control by the employer. The question is whether the employer exercises control over both the method and the results of an individual’s labor.

Here, the drivers are free to work through whatever method they see fit, are not directed, controlled, or supervised and are responsible for all expenses associated with deliveries. The Administrative Law Judge held that the claimants, and delivery drivers similarly employed, are independent contractors, and thus the employer is not liable for tax contributions and other benefits.

For more questions regarding the classification of drivers under New York or other states’ laws, please contact the attorneys at Rock Fusco & Connelly, LLC.

 

 

 

 

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