State of Washington Court of Appeals: Dept. of Labor & Industries v. A Place for Rover Inc.
In the case of Dept. of Labor and Industries v. A Place for Rover, Inc. (link to full opinion here), the Court held that service providers are not “working under an independent contract” when abiding by a terms of service agreement (TOS) of an online platform through which customers of the platform can connect with and contract for their services. Because service providers on such a platform are not “working under independent contract” with the platform owner, they do not fall within the statutory definition of “worker” for the purposes of RCW 51.08.180 with regard to the platform.
A Place for Rover, Inc. (Rover) operates a website and mobile application that allows pet owners to locate and communicate directly with pet service providers who offer pet-related services. These service providers set their own rates, what type of service they provide, the hours they work, and other details. Pet owners, looking for pet services, enter contracts with the providers and pay the service provider through Rover’s platform, and Rover keeps a percentage of the payment.
In 2017, the Department of Labor and Industries (DLI) received multiple workers’ compensation claims from pet service providers who utilized the Rover platform. DLI determined that pet service providers were covered workers subject to industrial insurance coverage and assessed over $200,000 in industrial insurance taxes and fines. Rover appealed the assessment to the Board of Industrial Insurance Appeals (the Board) asking that service providers be found to not be “workers” under the statutory definitions. The Board ruled that Rover was not an “employer” of the pet service providers and that service providers were not “workers” under the Industrial Insurance Act, title 51 RCW. DLI filed an appeal to superior court, but the court affirmed the decision. DLI appealed the superior court’s order affirming the Board’s decision, arguing that the platform’s TOS was the independent contract between Rover and service providers that the providers were working under.
The Court of Appeals disagreed, stating that although there is no question that the TOS is a contract between Rover and service providers, RCW 51.08.180 requires the worker to be “working under an independent contract.” Rover did not contract with the service providers to “undertake a specific project” or to “do something” for Rover. They were not assigned particular jobs or matched with specific customers. There was no requirement to do any work. The TOS set forth terms to use Rover’s online platform and to enter into, perform, and get paid for specific projects from customers. The Court found that pet service providers were not “working under independent contracts” with Rover but with pet owners.
DLI emphasized that Rover rejects some service providers who apply to post their services, conducts background checks to exclude applicants, and can remove service providers from the platform for poor performance. The Court ruled that these instances were Rover deciding who could use its platform, not providing pet services. Rover even got involved with issues regarding service failures and could withhold compensation if service providers were deficient. This was simply Rover providing services to pet owners, who were under their own TOS with Rover.
The Court found that pet service providers were not “workers” for Rover and the assessment of workers’ compensation taxes was properly reversed.
Takeaway from this Case
Platforms that provide methods for customers and service providers to connect and contract for services should look closely at whether service providers utilizing the platform would be classified as workers through the TOS or not. This is a heavily fact-based distinction, and not based on traditional factors used to distinguish between employee and independent contractor but rather based on if a worker is providing services under a contract with the platform. Factors like the way the platform filters providers, recommends providers, and how involved the platform is in the transaction are all elements that can tip the scale one way or the other. If a platform owner does not desire to be considered contracting with these workers, they should look closely at the structure of a typical transaction and their terms of service to ensure the Industrial Insurance Act will not apply to their contractual relationship.
If you have further questions regarding this recent Washington Court of Appeals decision, or what it means for employers in Washington, please do not hesitate to contact the attorneys at Wallace, Klor, Mann, Capener & Bishop, P.C.
*This article/blog entry is not to be construed as legal advice for any specific situation or employer. To inquire about the impact this decision or any other article may have on your business or an individual set of facts, please contact an attorney.