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Business Liability by Utilizing Third-Party Delivery Services During COVID-19

Last week, restaurants, bars, taverns, and other food & beverage establishments were ordered by New York State Governor Andrew Cuomo to limit their operations to take-out and delivery orders of food and alcohol in an effort to mitigate the spread of COVID-19. Although many establishments have previously utilized third-party delivery services such as GrubHub, Uber Eats, Postmates, and DoorDash, with these new sales restrictions in place we will undoubtably see more establishments rely on these delivery services to maintain business. Moreover, as we begin to see more layoffs, individuals may turn to these delivery services to supplement their income. We may even see these establishments start delivering with their own employee staff. The delivery companies claim to provide flexibility for drivers and for the establishments – drivers can make their own schedule, and establishments can utilize the services of a third-party without the employment and overhead expenses. But what happens when a delivery driver, or one of your employee drivers, commits some negligent act? Is the driver classified as an “employee” or an “independent contractor”? What liability, if any, can be imposed on the delivery service company and/or the restaurant/bar/establishment?

Liability of Restaurant/Establishment

Third-party delivery services present many benefits for restaurants and other establishments. Namely, these services reduce or eliminate the costs incurred with hiring additional personnel. Despite some benefits, these services also may open up the establishment to unforeseen liability issues. Some of the most commonly voiced issues include food handling and safety, auto accidents, and/or negligent or criminal acts committed by the drivers.

Establishments can sign partnership agreements with the major delivery service companies (i.e, GrubHub, DoorDash, etc.) before utilizing their services. However, special care should be taken to review the agreement, which many times may be worded in favor of the major company. Establishments can request indemnification clauses in the event an issue arises after the delivery driver has picked up the food order. Establishments should also review their commercial general liability policies to evaluate where their liability ends, and the third-party delivery service’s liability begins. In some instances, companies may benefit from purchasing additional insurance in the event of an off-premises incident. Establishments can also require proof of insurance from the drivers and third-party delivery company, which could be crucial in the event of an automobile accident. One final strategy is for the establishment to explicitly denounce (on its website, menus, etc.) any agency relationship with the delivery service company.

Liability of the Third-Party Delivery Service Company

Several courts around the country have largely held that delivery drivers are considered “independent contractors” of the third-party delivery service companies. The rationale for many of the courts hinged on the drivers’ autonomy and independence over when, where, and how frequently they work. Another major consideration was the drivers’ abilities to work simultaneously for competing companies. In analyzing the employee/contractor relationship, courts may also consider, among other things, whether the agent or principal supplies the tools and instrumentalities required for the job, whether the agent is paid per job or paid per hour, the level of supervision that the principal exercises over the agent’s daily work, and the length of time that the agent is engaged by the principal.

Despite the courts’ rulings, there are several dozen lawsuits pending across the country over the employee/contractor distinction. There have also been lawsuit settlements in favor of delivery drivers for millions of dollars for claims that they should be legally classified as employees.

Noting the need for more protection for these drivers, lawmakers in several states have written bills that provide drivers with more rights, and thus a stronger claim to be classified as an employee of the respective delivery service company. In 2019, California governor Gavin Newsom signed into law a bill requiring that businesses hire workers as employees, not contractors, with some exceptions. Despite lobbying efforts, companies such as Uber and Lyft were not granted an exception, making the distinction between employee/contractors in the “gig economy” much more blurred in California. In January 2020, New York State Governor, Andrew Cuomo, announced in his State of the State address that he would work to classify “gig workers” as employees of the platforms they work under. As technology evolves and more people continue to turn to “gig jobs” to supplement their income, it remains to be seen how the courts and legislature protect this new group of workers.

Our firm has extensive experience in counseling businesses and individuals on proactive employment law matters and litigation employment law claims. If you have any questions about this Legal Briefing, please contact any member of our Firm at (585) 730-4773. Please note that any embedded links to other documents may expire in the future.


This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2020 Law Offices of Pullano & Farrow PLLC

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