The NY Times reports that:
In its relentless push for e-commerce dominance, Amazon has built a huge logistics operation in recent years to get more goods to customers’ homes in less and less time. As it moves to reduce its reliance on legacy carriers like United Parcel Service, the retailer has created a network of contractors across the country that allows the company to expand and shrink the delivery force as needed, while avoiding the costs of taking on permanent employees.
But Amazon’s promise of speedy delivery has come at a price, one largely hidden from public view. An investigation by ProPublica identified more than 60 accidents since June 2015 involving Amazon delivery contractors that resulted in serious injuries, including 10 deaths. That tally is most likely a fraction of the accidents that have occurred: Many people don’t sue, and those who do can’t always tell when Amazon is involved, court records, police reports and news accounts show.
Even as Amazon argues that it bears no legal responsibility for the human toll, it maintains a tight grip on how the delivery drivers do their jobs.
Their paychecks are signed by hundreds of companies, but often Amazon directs, through an app, the order of the deliveries and the route to each destination. Amazon software tracks drivers’ progress, and a dispatcher in an Amazon warehouse can call them if they fall behind schedule. Amazon requires that 999 out of 1,000 deliveries arrive on time, according to work orders obtained from contractors with drivers in eight states.
As I explain in my book, Agency, Partnerships, and LLCs:
A principal’s vicarious liability in tort depends not only on whether an agency relationship existed between the tortfeasor and the principal, but also on the kind of agency relationship that is involved. A principal is only liable for the acts of his agent if the agent is deemed the principal’s “servant.” (In which case the principal is known as a “master.”) If the agent is deemed to be the principal’s “independent contractor,” the principal is not liable for torts committed by the agent. As we shall see, it is not always easy to tell into which category a particular relationship falls. Moreover, we will also see a variety of exceptions to the general rule. Having said that, however, the distinction between a servant and an independent contractor still forms the starting point from which analysis must proceed.
Restatement (Second) § 2(2) defines a servant as “an agent employed by a master to perform service in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right to control by the master.” By way of contrast, § 2(3) defines an independent contractor as “a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.” In order for a master-servant relationship to be found, the master does not have to actually control the agent’s physical performance of the assigned task. The master merely must have the right to exercise such control. In contrast, where a principal sets forth the desired result but does not have the right to tell the agent how to achieve that result, the agent is an independent contractor.
A potential source of confusion must be addressed at the outset. All servants are agents, but not all independent contractors are agents. If Pam hires Al to build a house for her at a stipulated price and Pam reserves no power of direction over the conduct of the work, Al is an independent contractor but not an agent (typically referred to as a nonagent independent contractor).[1]Al has no fiduciary duties to Pam and has no power to affect Pam’s legal relations. Hence, for example, no contracts entered into by Al purporting to be on Pam’s behalf will be biding on Pam as a matter of agency law. We are concerned here only with those independent contractors who are also agents (referred to by some as agent-type independent contractors and by others as nonservant agents).
In some cases, of course, it is relatively clear which type of relationship is involved. For example, lawyers, real estate brokers and stock brokers are usually deemed to be independent contractors, rather than servants of their clients, because the clients have little, if any, control over the day-to-day conduct of their lawyer or broker. In contrast, a legal assistant typically would be viewed as the lawyer’s servant, because the lawyer is likely to have a great deal of control over the assistant’s work.[2]
Unfortunately, these simple examples are polar extremes on a spectrum of types of relationships and many arrangements fall into the vast grey area in the middle. As an aid to categorizing ambiguous relationships, Restatement (Second) § 220(2) identifies the following nonexclusive list of factors to be considered:
(a) the extent of control which, by the agreement, the master may exercise over the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or business;
(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h) whether or not the work is a part of the regular business of the employer;
(i) whether or not the parties believe they are creating the relation of master and servant; and
(j) whether the principal is or is not in business.
The commentary to § 220 suggests that the two most important factors, which together have “almost conclusive weight,” are the customs of the locality with respect to the degree of control exercised by the principal and the amount of skill required by the agent’s occupation.
Although several of the § 220(2) factors refer to employment, consideration is not required. Per Restatement § 225, a person serving gratuitously nevertheless may be deemed a servant. On the other hand, many courts stress that merely doing someone a favor does not make you their servant.[3]Instead, the gratuitous actor’s performance of the task must be subject to the physical control of the master and the master must have consented to the relationship.
With that background in mind, we can turn to a case that seems directly applicable:
Frank Frausto was a delivery driver for the Arizona Republic newspaper. Frausto’s car collided with a motorcycle driven by plaintiff William Santiago, who then sued the newspaper. The newspaper defended by claiming that Frausto was an independent contractor. The trial court agreed, granting the newspaper summary judgment on the issue as a matter of law. Applying an 8 factor test tracking Restatement (Second) § 220(2), the Arizona supreme court reversed and remanded for trial.[4]
First, as to control by the alleged master, the court noted that the newspaper exercised little actual supervision, but was able to give Frausto specific instructions with the expectation that they would be followed. Pointing out that the power to fire is regarded as “one of the most effective methods of control,” the court noted that Frausto could be terminated without cause on 28 days notice and, moreover, could be terminated for unsatisfactory service without any notice. Second, the court noted that Frausto had no independent delivery business. He worked only for the newspaper, payments went to the newspaper and not the carrier, and accounts were serviced by the newspaper. This distinguished the case at bar from other newspaper carrier cases in which the delivery firm bought the newspapers from the publisher and resold them to delivery customers at a profit. Third, the court noted that being a newspaper carrier required little specialized or skilled training, which suggests that Frausto was a servant. Fourth, while the newspaper did not provide all of the necessary supplies, it did supply the newspapers and designated the route to be covered. Fifth, the court observed that the relationship was of indefinite duration, which points towards finding that Frausto was a servant. Sixth, Frausto was paid a regular weekly salary. Seventh, newspaper delivery was a core part of the publisher’s business. Finally, Frausto stated that he regarded himself as an employee. In sum, on all of the § 220 factors there was at least some support for treating Frausto as a servant and summary judgment was inappropriate.
The parallels to the Amazon situation are obvious. To be sure, there are cases coming out the other way, but my view is that Amazon has some serious ability risk in these cases.
[1] See, e.g., Kemether v. Pennsylvania Interscholastic Athletic Ass’n, Inc., 15 F. Supp.2d 740, 748 (E.D.Pa. 1998) (“Where prerequisites of agency, such as control, are not satisfied, a non-agent independent contractor relationship may exist: A person who contracts to accomplish something for another or to deliver something to another, but who is not acting as a fiduciary for the other is a non-agent contractor. . . . The term is used colloquially to describe builders and others who have contracted to accomplish physical results not under the supervision of the one who has employed them to produce the results.”).
[2] Senior corporate executives are usually deemed servants, because they are subject to supervision by the board of directors. SeeRestatement (Second) § 220 cmt. a (referring to “managers of great corporations” as “superior servants”).
[3] See, e.g., Joseph v. Dickerson, 754 So.2d 912, 917 (La. 2000); Sandrock v. Taylor, 174 N.W.2d 186 (Neb. 1970).
[4] Santiago v. Phoenix Newspapers, Inc., 794 P.2d 138 (Ariz. 1990). But see LaFleur v. LaFleur, 452 N.W.2d 406 (Iowa 1990) (newspaper carrier was an independent contractor as a matter of law).
