More and more, businesses are using apps and websites to provide a platform to connect independent contractors with customers who need their services. Historically, it has been assumed that the business providing the platform is—at minimum—the “hiring entity.” So if the workers using the platform are misclassified as contractors, that platform business could be treated as the “employer” and held responsible for employee wages, payroll taxes, and workers’ compensation premiums. In a recent Washington Court of Appeals decision, Dept. of Labor and Industries v. A Place for Rover, Inc., the Court said not so fast, clarifying that just because your business provides the online platform and facilitates the service doesn’t automatically make you the employer.
Below is a brief discussion of the case, and my takeaways.
Relevant Facts
In A Place for Rover, Rover operated a website and mobile app that allowed pet owners to find and hire pet service providers. In order to use the platform, pet service providers had to apply to Rover and pass a criminal background check. Once their application was approved, they could post a profile, list the services they offer, define which types of pets they’ll work with, and set their own rates. Pet owners who need services are able to access the platform, communicate with the provider, and book and pay for the services through the platform.
Both parties have to agree to Rover’s Terms of Service (TOS) in order to use the platform. In the TOS, Rover states that it does not provide pet care services, it does not employ, recommend or endorse either the pet service providers or the owners. It merely provides a “neutral venue” that connects the parties and processes the payment for services. Regarding the payment of Providers, Rover states that its role is to facilitate payment as a “limited payment agent.” Under this arrangement Rover collects the full fee from the pet owner, keeps a 25% service fee, and disburses the remainder to the pet service provider.
While Rover notes in the TOS that it is a neutral venue, it sometimes becomes involved in resolving issues between pet owners and providers, including conducting background checks, handling complaints and issuing refunds for substandard services, and removing providers who fail to follow platform rules or who provide substandard services.
Rover did not have an independent contractor agreement with pet service providers because it considered itself as providing a platform for their use pursuant to the Terms of Service, and not as a hiring entity. This turned out to be significant.
The Court’s Decision
L&I audited Rover after receiving workers compensation claims from several pet service providers. As a result of the audit, L&I determined that the providers were Rover’s employees.
On appeal, the Washington State Court of Appeals held that Rover merely provided an online platform for the parties to use and that there was neither an employment nor independent contractor relationship with the pet service providers. The court determined that to the extent there was an employment or contractual relationship, it was between the pet owner who hired and contracted with the pet service provider.
When L&I tried to use control language in the Terms of Service to show that Rover was not merely a technological platform, but had involved itself in the provision of services by requiring providers to apply, conducting background checks, removing poor-performing providers, etc., the Court determined that this was merely Rover exercising control over who could use the platform, and not control over how the pet service providers performed their services.
Key Takeaways
If I operated a business that provided a platform connecting service providers to customers—and I wanted to avoid being considered the employer—these would be my main takeaways from this case:
- Stay a neutral facilitator. Your platform should act as a venue where service providers and clients find each other. Don’t insert yourself into how services are performed.
- Make sure the service agreement is between the customer and the provider. Your only agreement with either party should be for use of the platform (your Terms of Service).
- Use a clear Terms of Service (TOS). The TOS should emphasize that you are not the provider of the services—and that all service-related terms are negotiated directly between provider and customer.
- Be more cautious than Rover about control. Rover was doing a lot: background checks, refunds, and provider removal. To reduce risk, consider involving yourself much less than Rover did.
In the end, I think that Rover could have gone either way, in that a different Court could have relied on the same facts and concluded that Rover was involved enough to be in the position of an employer/hiring party. So if I wanted to rely on a platform/Terms of Service model, I’d err on the side of caution and be far more conservative than Rover was, to ensure I wasn’t considered an employer.
You can read the full opinion here.