Economy

Workers Pay The Price For Amazon’s New One-Hour Delivery

CREDIT: Shutterstock

Amazon’s one-hour delivery option launched in the Bay Area this week, but the workers behind the scenes of the “Prime Now” service say they’re paying a steep price to make the super-fast turnaround a reality.

Prime Now drivers are suing Amazon over pay that amounts to less than the California minimum wage. Drivers in the Los Angeles market make $11 an hour, but buy their own gas, insurance, and auto maintenance service. Drivers who cover 120 miles in a day without being reimbursed at the standard per-mile rate “make $88 in pay for eight hours with $69 in expenses, and are left with $19,” attorney Beth Ross, who is representing the Prime Now drivers, told the San Francisco Chronicle.

The lawsuit alleges that the company is illegally treating the drivers as independent contractors rather than employees when the circumstances of their work fit the legal definition of an employer-employee relationship. The lawyers representing the four drivers are hoping to expand the case to a class action representing everyone who’s driven for the company’s Prime Now service in California.

Prior to filing the Prime Now class action, Ross and her firm won a landmark ruling in a very similar case against FedEx, which must pay hundreds of millions of dollars in back wages to drivers after failing to persuade judges that its workers were truly contractors. Like the FedEx drivers, Amazon’s Prime Now workforce must wear a uniform, adhere to a schedule set by Amazon and its subcontractors, and accept whatever deliveries they are assigned. There are fewer direct parallels between the Amazon suit and other recent high-profile court cases against companies like Uber and Lyft, but they all revolve around the same contractor/employee distinction in labor law.

Misclassifying workers as contractors delivers large, immediate savings to companies. Employees would be entitled to a wide variety of protections including reimbursement for the expense of fueling and maintaining the personal vehicles they use for deliveries. Employers pay payroll taxes that fund Social Security, Medicare, unemployment insurance, and other safety nets. Contractors incur no such cost.

Many modern companies that attract vast public attention and huge sums of investor capital derive their success from relentlessly chiseling away at the per-unit cost of everything they do. It’s about $4,000 cheaper per year to have an independent contractor on your payroll than an employee. For tech companies who rely on large numbers of human workers to convert their digital innovations into a deliverable service customers will pay for, cutting back the cost of that workforce by thousands of dollars per head can make a huge difference in profitability.

But you can’t build a workforce of contractors and then wield it like a traditional employer, mandating schedules, uniforms, and workplace standards that you enforce by terminating supposed contractors who deviate from your dictums. Trying to have it both ways on worker classification boosts corporate performance but leaves low-wage workers by the roadside – and weakens the safety net programs such workers rely on by starving them of payroll tax collections. “Where I grew up, it was called cheatin’,” Labor Secretary Tom Perez said recently during a White House event about modern workplace issues and misclassification.

Smart people who are concerned about the peculiar stew of incentives that’s inspired a raft of misclassification lawsuits against so-called “sharing economy” companies say that the best solution is to create a third class of worker-workplace relationship that better suits the in-between business models common to the sector. But until such a third-way option emerges, the government and courts can only enforce the traditional divide between employees and contract workers.

How that enforcement will ultimately play out remains hard to discern. Relatively straightforward cases centered on similar issues with traditional employers rarely deliver actual money to victimized workers even where the relevant agencies try to enforce the law. The courts have yet to rule on a variety of subtle questions at the heart of the multiple major challenges to Uber’s contractor workforce.

And the last time Amazon itself faced a core challenge to its labor practices, it eventually won. The Supreme Court ruled last winter that Amazon does not need to pay its warehouse workers for the time they’re forced to spend going through security checks at the end of a shift to prevent theft.