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Nasir and Matt discuss Amazon's creative move avoid having to hire drivers as employees and why it hasalready gotten sued.

Full Podcast Transcript

NASIR: Welcome to our podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha and, today, we’re joined with our prompt delivery expert…

MATT: Matt Staub.

NASIR: Matt Staub. Once again, a master of everything and a jack of none.

MATT: It’s easy to be a delivery expert. You know, it’s pretty simple. You pick up what you’re delivering, you get to the destination, and you drop it off, and then that’s it.

NASIR: Well, I mean, you make it sound so easy, obviously. I mean, you’re the expert but it’s complicated for us.

MATT: You buy a lot of things online.

NASIR: I do. There was a time where, like, I think we’ve calmed down now but we just get something every day and we don’t even remember what we ordered. It’s great because it’s almost like you’re birthday because you’re opening presents like, “Oh, what’s this?” “Oh, yeah, the…” whatever we ordered.

MATT: Cat-based things.

NASIR: Yeah, cat food.

MATT: So, this service that launched a couple of months ago in LA and I think it was in New York City possibly even as early as late last year – definitely early this year – that would kind of help you out in that situation where Amazon Prime now – because it delivers things in one and two-hour delivery times. If you ordered something, I think you would remember it by the time it showed up in an hour or two hours.

NASIR: That’s true. It solves that big problem that most people have.

MATT: Yeah, of remembering what you ordered. In LA, they launched, I believe it was August this year. Guess what? It didn’t take too long for them to get sued over it. They did try to solve the issue that we’ve talked about many times with the employees versus independent contractors. Not to rehash that too much but, you know, obviously, there’s a lot of discussion going on that these drivers, these delivery drivers should be employees according to some people. Companies like Amazon and Uber believe they should be independent contractors. And so, what did Amazon do? This is something I wasn’t even aware they did until this lawsuit just got filed I believe this week. It’s kind of creative.
They hired this company. I assumed it’s called Scoobies?

NASIR: Yeah, something Scooby Doo.

MATT: Scoobies. They hired Scoobies which is just a courier service. Amazon contracted with them and then Scoobies, the courier service, has the actual drivers which unsurprisingly are independent contractors. The drivers in this situation are still independent contractors just one degree away from Amazon Prime which, of course, didn’t result in them not being named in this class action lawsuit that just got filed. Like I said, I mean, by the time this comes out, about a week ago.

NASIR: Days ago. By the way, Scoobies, I think, like you mentioned, is a courier service so they’ve been operating for a while so it’s not like this is something new for them on this classification issue of drivers. And so, that’s why I’m a little suspicious of the claim itself of how accurate or legit it is but let’s just, for the sake of discussion and, as we always do, let’s assume that they’re correct. What’s interesting is that, okay, as Matt explained, you have Amazon hiring Scoobies who’s hiring other independent contractors, and then those independent contractors are suing Scoobies and Amazon saying that they are their employers. That’s interesting because, you know, we’ve talked about classification of employees and independent contractors probably every day on the podcast since the dawn of time it comes up. But I think this is the first time we really got to this issue. That means that, if you hire a third-party vendor and they hire independent contractors and they mess up, then in theory you could be liable for that misclassification and that doesn’t seem correct, right?

MATT: It doesn’t but, you know, Amazon’s pockets are a lot deeper than Scoobies, I would assume.

NASIR: That’s right.

MATT: I only glanced at the complaint. It’s not a joint employer co-employer situation but kind of that idea I guess is what they’re saying – not from the employer side of it, obviously.

NASIR: I went through it. I mean, I didn’t read every word but I think that’s their concept. I think they are alleging that Amazon is their employer and I think they have to. In order to recover any kind of damages for the labor law violations that they name in the lawsuit, Amazon would have to be the employer. It sounds strange but we should note that it’s not crazy. In other words, it’s not one of those lawsuits where it’s like, okay, there’s no way that they can get Amazon on the hook for this because, you know, like I said, it’s a company hiring another vendor that’s hiring independent contractors. But there is a definition. There’s a legal definition of what an employer is and there’s statutory definitions by state and there’s also a common law definition that a lot of courts fall back to. Frankly, it’s not much different than how you analyse a classification of independent contractor versus employee. That is, for example in this case, Amazon exercises control over wages, hours, or working conditions or whether they engage them in the typical things that an employer would do as far as in the management of things like that. But I’m not sure we have those kind of things here or how it could even be possible.

MATT: Yeah, of course, those are answers we’ll get if and when the discovery process happens. All we have to work on right now is this complaint that’s just been filed and we have one side of things which… it was class action, right?

NASIR: Yeah, it was a class action. Yeah, there was three or four plaintiffs. They want to put it into a class which I don’t know if they hired Scoobies around the country but I think it’s important, let’s compare this to FedEx, right? FedEx got sued a long time ago. They actually settled not too long ago. You know, basically, this last summer, $227-million-settlement for a bunch of its delivery drivers that were misclassified as independent contractors. Compare that, in that case, these so-called independent contractors were driving in FedEx trucks with FedEx uniforms and had schedules and had a tremendous amount of control. It seems not obvious I shouldn’t say but there’s definitely an argument there.
Now, with these Scoobies guy, Scoobie Doo delivery drivers, I don’t know if they were wearing Amazon gear or if Amazon was directly managing them, but it seems strange that they would be and I would assume that they were just a regular delivery driver, whatever Scoobies does for them, and they may be misclassified as a Scoobies employee but, as an Amazon employee? That just seems strange to me.

MATT: We talked about FedEx a long time ago.

NASIR: Yeah, it was a while ago.

MATT: Was that the one? I’m trying to recall… some of those drivers, did they own the trucks?

NASIR: Yeah, they actually had them pay for the trucks, and that’s just one factor of things which was a little unusual but they were required to buy the truck but then they had all these specifications and it had to have the logo on there, had to be a certain vehicle and all that.

MATT: I think this is the same attorney that led the FedEx claim.

NASIR: That’s a big deal because, I mean, that gives obviously a lot of credibility to the actual lawsuit.

MATT: This is a similar thing now. Ultimately, whoever they go after, whether it be Scoobies, whether it be Amazon, we’ll have to wait and see what happens. That’s definitely going to be helpful that she’s basically gone through this whole process before.

NASIR: Yeah, it leads me to very blindly conclude – I mean, obviously, take this with a grain of salt – there’s probably something here maybe with Scoobies but I’m really interested to see how they get Amazon on the hook on this – unless there are some facts that I’m not aware of that really changes the circumstance but I think the facts would have to be really damaging. I think they make the argument that, okay, these Scoobies drivers were perhaps hired just to do these Amazon deliveries.

MATT: Yeah.

NASIR: But, if Amazon is not controlling that, if Amazon just says, “Hey, we’re going to give you some delivery orders, Scoobies, and just in your normal process of making deliveries that you fulfil these orders,” Amazon is not really managing that process. They don’t have any control where Scoobies is going to hire an entire workforce as an independent contractor just to service this particular contract that they have with Amazon.

MATT: Right, and you would have to think that, in the agreement between Scoobies and Amazon heavily shifted or pushed all the liability onto Scoobies which, as it should, like you said, if they’re really just saying, “We have these orders that need to be fulfilled, you’re the courier service, you take care of it.”

NASIR: That’s right.

MATT: That seems pretty fair for Amazon. I mean, that’s how it should be. They were creative in how they went about it but they should not be surprised that this is what ultimately happened very quickly into the process.

NASIR: Keep in mind that one of the allegations is that minimum wage is not being paid and that’s interesting because, obviously, Scoobies gets paid by Amazon and so Scoobies has to take some kind of profit in order to make the payment. I wonder also with, you know, how much Amazon is paying Scoobies that they have to have known that the drivers – I think this would be argued at least by Beth Ross – Amazon would have had to have known that they have to pay under a minimum wage in order to make that affordable and I think that would be the argument and I think that’s the criticism in Amazon because people are like, “Okay, this is why this Amazon Prime Now service is so cheap.” I even saw this one somewhat clever tagline: “Delivery drivers aren’t drones, they’re real people.” Basically, alluding to Amazon Prime Now’s drone service that they plan on launching in upcoming years.

MATT: Well, I don’t know if we’d be able to classify those once in place but…

NASIR: Try that, Beth Ross! Dare you!

MATT: She wins.

NASIR: She wins, yeah.

MATT: They’re saying, according to the complaint, the Scoobies required the drivers – or at least these three drivers listed – to sign new contracts agreeing to compensation of $11.00 per hour plus tips but it didn’t provide them copies of the new contract. I don’t know what that means.

NASIR: And then, there’s all these allegations about the tips. Like, they say in their complaint that somehow the customers can tip the drivers and it goes directly to them but they don’t actually get it or there’s some kind of lack of transparency there somehow. It’s like basically nine different causes of action including everything from breach of contract to some of the other common ones like waiting time penalties, failure to pay overtime, minimum wage, reporting pay, et cetera. All the things that go with when you misclassify an employee because, you know, they don’t have those kind of protections like breaks and things like that.

MATT: Yeah, it’s all the things employees would be given – or these drivers are saying they should have been employees and should be given these things.
To me, the big one, really, would just be if I was one of the drivers, what I care about – meal periods, break periods, whatever – the big thing’s reimbursement for expenses because, assuming you’re using your own vehicle, even if not, just paying for gas, paying for insurance, paying for repairs, all that stuff, I mean, that’s what’s really going to add up coming out of your bottom-line.

NASIR: Yeah.

MATT: That’s the big thing to me if I was one of these drivers, and that’s coming from the expert in deliveries.

NASIR: Yeah, interesting. Yeah, I saw this – plaintiffs were each required to execute lengthy written contracts but were not provided with copies of these agreements and their request for copies of these contracts were denied by Scoobies, but their contract’s with Scoobies.

MATT: There’s no way the drivers would be contracting with Amazon or that would just defeat the whole purpose of Amazon doing it in the first place.

NASIR: That’s right. But, anyway, I mean, I think, you know, I don’t want to say “from a moral perspective” – gosh, what’s the right word? Again, I’m just trying to say that Amazon probably knew. They have to keep their cost down; otherwise, how is it going to be affordable, obviously?

MATT: You’re offering one and two-hour delivery turnaround times on things that are bought. I mean, I didn’t even get to the biggest issue. How are there one-hour delivery times in Los Angeles? There’s just no way that’s possible.

NASIR: Yeah, Amazon customers place their orders in the app and pick a two-hour delivery window – either 4:00 to 6:00 p.m. which is right in the middle of rush hour.

MATT: The worst time.

NASIR: Or 8:00 to 10:00 p.m. which, you know, that’s very reasonable.

MATT: Yeah.

NASIR: The whole 4:00 to 6:00 p.m., that seems crazy. But, if they had drones, that would make sense.

MATT: Yeah, I don’t think this is like Domino’s or old school Domino’s where, if it’s not in thirty minutes, it’s free or whatever. There’s no way they can make those guarantees.

NASIR: Well, you saw Walmart is getting those drones too now, right?

MATT: Are they?

NASIR: Yeah, it’s going to be drone city everywhere. You’re going to get everything delivered and it’s kind of scary.

MATT: Something bad will happen with that pretty quick into it, I think.

NASIR: I do like the concept. We definitely should do a seminar on classification of drones – independent contractor versus employee.

MATT: Yeah, and make the argument that they’re employees.

NASIR: Ah, I like it. Let’s think about it.

MATT: Yeah, this drone wasn’t given a meal break. Does it eat nuts and bolts? I don’t know what robots eat.

NASIR: Actually, they don’t eat anything, Matt.


NASIR: They’re robots.

MATT: Are there three rules of robots or something like that?

NASIR: Yeah.

MATT: They have to do whatever they’re told. Can’t attack people. Something else.

NASIR: I’m just going to look it up. Three laws of robotics – robot may not injure a human being or through inaction allow a human being to come into harm, a robot must obey orders, and a robot must protect its own existence as long as such protection does not conflict with the first of second laws.

MATT: Okay, I knew the two that were important. I don’t care if a robot gets attacked.

NASIR: All right, guys. Thanks for joining us.

MATT: Keep it sound and keep it smart.

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Legally Sound | Smart Business covers the top business stories with a legal twist. Hosted by attorneys Nasir N. Pasha and Matt Staub of Pasha Law, Legally Sound | Smart Business is a podcast geared towards small business owners.

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