On-demand delivery startup Postmates has been ordered to pay more than two years' worth of worker compensation premiums for its couriers in Washington.
The San Francisco-based company says the cyclists and drivers who work through the app are independent contractors who should be exempt from workers' comp coverage.
Unlike many states, Washington does require companies to pay premiums to cover independent contractors, but there are exceptions to that law. Those exceptions are determined by a series of legal tests. A contractor must pass all of them to be exempt.
In October, the state Department of Labor and Industries found that Postmates couriers do not pass those tests. The company has asked the department to reconsider that decision.
Like Seattle's for-hire driver collective bargaining ordinance and fears over Airbnb and the local housing market, the workers' comp issue is another example of the ways app-based service companies can clash with local regulating bodies.
As the so-called gig economy grows in Washington state, workers comp cases involving these types of companies have "almost exploded," according to Labor and Industries auditor Steve Beaty.
Beaty figures out when companies need workers' comp coverage. Part of the issue is determining what the company actually does.
For example, Postmates doesn't see itself as a delivery company. It says it's a tech company, and its contractors should be considered separate from the business that runs the app. Beaty's department doesn't agree.
"From our perspective we consider it to be labor that they're controlling," Beaty said. "Because they set the arrangement up, and they collect the money and then pay it out to different parties."
If the Labor and Industries department decision holds, Postmates can appeal to the state Board of Industrial Insurance.