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The Virginia Supreme Court has upheld a ruling that Amazon Flex drivers are employees and not independent contractors while criticizing the company for changing its arguments after it lost in prior decisions.

Amazon Logistics failed to convince the high court that a ruling that one Flex driver is an employee should not apply to all of its Flex drivers despite originally arguing that the ruling should apply to all drivers.

The firm only reversed itself and argued to restrict the ruling after it lost several earlier rounds in its bid to have its drivers classified as independent contractors and avoid unemployment tax liability.

“Amazon Logistics wrongly asserts before us that it has always maintained one position throughout his litigation,” the high court opinion declares. “Amazon attempts to win this appeal by arguing against its original legal strategy…, while claiming we should overlook its contradictions. Put more colloquially, Amazon now “zigs” when it previously “zagged.” This stratagem, therefore, fails—as it must.”

Amazon Flex is an app-based program where participants sign up as a delivery driver for 3-to-4-hour time blocks. Drivers use their own means of transportation and the Amazon Flex app downloaded on their smartphones to deliver Amazon packages or Amazon-subsidiary groceries.

The case arose when a Flex driver sought unemployment benefits. Donald Diggs filed an unemployment-benefits claim and provided proof of income via 1099 forms issued by Amazon. The forms reflected that Amazon had not deducted taxes from the earnings. That triggered an examination by the Virginia Employment Commission over Amazon’s tax liability and whether Amazon was required to report Diggs’ earnings as wages.

After an investigation, a commission tax representative issued a letter finding that Diggs and “similarly engaged” Flex drivers were Amazon employees. Disagreeing and insisting that the driver was an independent contractor, Amazon requested a hearing. The evidence at the May 2020 hearing included an Amazon Flex contract, Amazon’s liability questionnaire provided to the tax representative, the tax representative’s determination letter, and the testimony of a senior manager at Amazon, Diggs and the tax representative. Amazon’s senior manager testified that the terms of the Flex agreement and app-specific procedures applied equally to all Flex drivers. Diggs provided additional details on the performance review system and the training that new drivers receive.

As called for by Virginia law at the time, the hearing examiner applied the Internal Revenue Service’s 20-factor test for determining whether an employer exercised “sufficient control over the individual” for the individual to be classified as an employee. The hearing examiner concluded that Amazon exerted control “over its Flex drivers” and “the services provided by the claimant constitutes employment.” The examiner further ordered Amazon to pay unemployment payroll taxes for “other individuals who performed services as Flex drivers, and who were also misclassified as independent contractors rather than as employees.”

Amazon appealed to the circuit court, which affirmed the commission’s decision, and then Amazon appealed again. A unanimous panel of the Court of Appeals affirmed that Diggs was an Amazon employee and also that extending the decision to all Flex drivers was proper because “the terms and conditions” of the Flex agreement “apply equally to all Flex drivers.”

Amazon then took its case to the state Supreme Court, arguing that the Court of Appeals erred in holding that the evidence relating to an individual claim supported a determination that all individuals in the Amazon Flex program are employees and not independent contractors.

The Supreme Court has rejected Amazon’s contention that the Court of Appeals erred. Citing procedural rules that protect basic notions of fair play in the adversarial system, the high court found that the logistics firm’s arguments on appeal were inconsistent with its arguments before the commission and lower courts.

The high court also found that Amazon’s allegations against the commission in its appeal were unrelated to the claims of insufficient evidence. Rather, Amazon’s brief alleged procedural concerns. Amazon complained that its due process rights were violated when the commission “failed to afford Amazon sufficient process to build a record beyond Mr. Diggs’ unique circumstances,” and “did nothing to correct Amazon’s reasonable understanding that the proceeding was limited to Mr. Diggs,” even though Amazon maintained all along that the case concerned the situation of all Flex drivers.

The high court said Amazon’s arguments succumbed to the “broader and more demanding” approbate-reprobate doctrine and are therefore waived. A litigant cannot “approbate and reprobate by taking successive positions in the course of litigation that are either inconsistent with each other or mutually contradictory,” or else such arguments are waived, the court explained.

Amazon not only participated in the commission’s process, but also affirmatively sought a class-wide ruling that all Flex drivers are independent contractors—and argued that the evidence would support such a ruling. The commission agreed with Amazon’s position that a class-wide ruling was appropriate, but found instead that all Flex drivers were employees.

“After losing before the commission, Amazon tried to retroactively pivot away from its strategy. Amazon now argues that the record is insufficient to support a ruling that applies to all Flex drivers and that it only ever sought a limited decision for a singular Flex driver, Diggs. Such a contradictory shift in position to mitigate self-inflicted wounds violates the approbate-reprobate doctrine,” the court concluded

The court described how Amazon “belatedly attempted to repudiate” its original position. Amazon never argued during the hearing that Diggs’ contract terms differed from other Flex drivers. Instead, Amazon argued that the unsigned boilerplate contract was sufficient to show that all Flex drivers are independent contractors. Amazon even submitted that, if the commission decided that Diggs was an employee, only then is there “no evidence” to support a conclusion “with respect to all of the other delivery partners in Virginia.” In other words, the court added, Amazon posited that all Flex drivers should only be bound by the decision that favors Amazon, otherwise the evidence should be discounted. Amazon now appeals because this “one-sided conditionality” was rejected.

At the Court of Appeals, Amazon also asserted a new argument—that the decision must be vacated as to any Flex drivers who enrolled in the program after July 1, 2020, because the General Assembly amended the definition of “employment” under state law to no longer include the IRS’s 20-factor test. The Court of Appeals held that Amazon waived this argument by failing to fully develop it in its brief. The Supreme Court would not consider Amazon’s argument regarding the change in statute because Amazon failed to address this issue in its assignment of error.

However, the court added that nothing prevents Amazon or any other employer from pursuing a case based on a change in the law or different substantive terms of an employment agreement, either of which may lead to a different result. In fact, the court noted that the employment commission conceded that, should Amazon’s circumstances materially change since the issuance of the decision—for example, through either a change in the law or a change in the Flex contract—Amazon may request a new hearing.

Topics Personal Auto Virginia