Can I get unemployment for my delivery work for Grubhub, Doordash, Postmates, Uber Eats or other gig companies? How will the new stimulus package impact me as a delivery driver?
Normally unemployment isn’t something you would be eligible for as a contractor for Doordash, Grubhub, Uber Eats and other delivery platforms. As independent contractors we don’t fall under the same umbrella as employees.
No one is paying unemployment insurance to cover us. Ultimately, being self employed, no one else can decide for us whether to keep delivering or not.
However, the CARES act changed a lot of things. Self employed people and gig economy workers were made eligible for special unemployment benefits. Yet, a couple of weeks in, we still don’t know for sure how that’s going to work.
Understanding normal unemployment.
Under the standard unemployment structure, we would not qualify. We are not employees but instead are operating as businesses. Technically we’re no different than a store owner or a small plumbing outfit or a mom and pop telecom shop.
Here’s how it normally works. Businesses who have employees have to pay unemployment insurance to the state for each of their employees, AND They pay federal Unemployment Tax.
These payments help fund the benefits that are paid to unemployed individuals. Employers end up paying up to $420 per employee for the Federal Unemployment Tax (FUTA) – 6% of the first $7,000 in wages.
They also pay their state unemployment tax (SUTA). Those rates vary depending on the state. Rates may vary as well based on an individual company’s history.
Qualifying for unemployment
Then when an employee is let go, in certain circumstances they can claim unemployment benefits that are usually a percent of their normal wages. The federal government lays out these guidelines, saying you usually qualify if you:
- You are unemployed through no fault of your own (they go on to explain this usually means it’s because there’s no more work available)
- You’ve earned a minimum amount of wages and worked a certain amount of time in the past (which can vary by state)
- You meet any additional state requirements (depending of course on your state)
In general, it means that you can’t quit your job and collect unemployment, nor can you be fired for cause. In most states you ahve to have worked a certain amount of time in four of the last five quarters.
This means there are a lot of reasons you wouldn’t qualify for unemployment when doing delivery for Grubhub, Doordash, Postmates, Uber Eats and others
Remember, we’re talking about normal circumstances. Unemployment before Covid circumstances.
First off, we’re not employees. That’s kind of an important one.
The thing is, when a business owner goes out of business, they are not able to take unemployment.
You could own a small restaurant. You could own a multimillion dollar company with hundreds of employees. Either way, if you go out of business, you normally cannot claim unemployment.
Second, we don’t pay any unemployment insurance.
I can guarantee that Grubhub and Doordash aren’t paying any for you. That’s part of why they want to use contractors instead of employees: They can avoid paying things like unemployment insurance, payroll taxes, worker’s comp, etc.
Finally, the most important stipulation is you’re separated involuntarily.
In other words, when you are the one making the decision, you normally don’t qualify.
That’s hard to do when you’re the one who calls the shots, right? As independent contractors, there’s no laying off. The closest thing to that might be if Grubhub or Doordash were to close in your particular market.
Some states are trying to get gig workers covered by unemployment.
Okay, some states are trying to go beyond that, and make us employees.
California passed AB5 September last year. That law established guidelines around when you can or cannot use contractors. It seems clear to me, based on some of the rhetoric I saw, that it was aimed at gig companies like Uber, Doordash, Grubhub, etc.
How much of that legislation is really meant to make things better for workers? How much of it is a power grab? Is it more about the state getting more tax money or unemployment insurance premiums? How much was to benefit unions?
That’s probably another discussion for another time.
Update: In the November 2020 election, voters in California approved Prop 22 which allows gig apps to continue to use contractors. Meanwhile, many are pushing for ProAct, which is national legislation that would implement the same ABC test as AB5.
In November 2019, New Jersey fined Uber $649 Million for unemployment insurance fees, disability taxes and penalties. The state department of labor assessed those fees, however the matter has not been settled yet by the court system.
The recent New York Court of Appeals decision
Most recently (and probably a bigger impact than AB5), New York’s highest court just ruled that a Postmates courier was indeed an employee. This was on a five year old unemployment claim from a driver who had their contract terminated.
This one is huge. That’s because it was from their highest court. There is no room for appeal.
There have other decisions. However, companies have tended to settle out of court before it could ever get to a higher court decision. This is the first one like this that I know of to actually get as far as it could get.
The thing is, the reasoning they used applies to all of the gig delivery companies. It probably applies to Uber and Lyft and a number of others. This decision was related to unemployment but it sets a precedent for other claims.
I think the only reason this one has slid under the radar so far is because of all the news out of New York around COVID-19.
There’s one major problem even in states that might support unemployment for gig workers.
It’s all based on income.
Early after passage of the CARES act, states including California were slow in offering unemployment for gig workers because how do you verify income?
Here’s the issue: Income for independent contractors isn’t based on the money coming from Doordash, Grubhub, Lyft, Uber Eats or others. Income is based on profit.
On what’s left over after expenses.
Think about this: How is a gig company supposed to report information for independent contractors? All they know is the revenue sides of our business. They don’t know the expense side.
The only thing they could know is the miles we drive.
But what if I accept one offer from Grubhub and the next from Uber Eats? Both are tracking my miles.
So, if each is reporting my expenses based on duplicate miles, it shows me earning even less. Great for taxes, not good for getting benefits.
I think that’s part of the tricky thing for gig workers. How do they gather and report the information that the state can use?
On the tax side, the miles we drive help us a lot on taxes. It helps on our taxes that we can claim more for our miles than what it costs for most of us. Unfortunately, that lowable taxable income can become the basis of the unemployment we qualify for.
What about unemployment eligibility for Gig Workers under the CARES act and the COVID-19 relief?
On the surface, it looks like we may be eligible for this special unemployment relief.
The only thing is, no one knows yet how it’s going to work. The New York Times reported concerns about the criteria that would be used that might still make it difficult for self employed workers to claim benefits.
The Times article reported that language was inserted in the bill to use guidance from the Disaster Unemployment Assistance program as a model.
It said that “Under that earlier program… workers indirectly affected by a disaster – like a supplier of baked goods to restaurants that have been destroyed – often have difficulty getting benefits. The process typically requires filling significant amounts of paperwork in a relatively short time.”
In the end, if someone is forced to stay home or close up shop because of shelter in place orders, they’re going to have an easier time claiming benefits.
What if what we do is considered an essential service?
In many instances, delivery service is taking off. How can you make a claim that your ability to earn was hurt in that environment?
If there is medical advice, doctor’s orders or something like that, you can make a case. If you are at a higher risk or have someone in your household at a higher risk, you may have an easier time getting benefits.
What about the driver who just decides it’s better to be safe and stay home? What about the courier who is finding it’s harder and harder to get orders because the market is so saturated with other couriers now?
The waits at some restaurants are getting ridiculous, some folks are tipping less, and it’s difficult for some to make as much money. What happens if they decide it’s not worth the pay cut to keep working?
Do these things hinder our ability to make claims if WE are the ones making the decision?
Recent guidelines from the government.
The Department of Labor recently released some guidelines related to Pandemic Unemployment Assistance (PUA). Essentially they state that covered individuals are “those individuals not qualified for regular unemployment compensation, extended benefits under state or Federal law, or pandemic emergency unemployment compensation, including those who have exhausted all rights to such benefits.”
So far, so good.
They go on to state that if someone is unable to work due to one of the several categories. Most of them are related to being diagnosed, having someone in the family who was diagnosed, being unable to go to work because of emergency orders or work being closed due to emergency orders.
But there is one paragraph that specifically applies to us:
The individual meets any additional criteria established by the Secretary for unemployment assistance under this section.
The Secretary has determined that, in addition to individuals who qualify for benefits under the other criteria described above, an individual who works as an independent contractor with reportable income may also qualify for PUA benefits if he or she is unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited his or her ability to continue performing his or her customary work activities, and has thereby forced the individual to suspend such activities.
For example, a driver for a ridesharing service who receives an IRS Form 1099 from the ride sharing service may not be eligible for PUA benefits under the other criteria outlined above, because such an individual does not have a “place of employment,” and thus cannot claim that he or she is unable to work because his or her place of employment has closed.
However, under the additional eligibility criterion established by the Secretary here, the driver may still qualify for PUA benefits if he or she has been forced to suspend operations as a direct result of the COVID19 public health emergency, such as if an emergency state or municipal order restricting movement makes continued operations unsustainable.Section C (Operating instructions) item k of Department of Labor’s guidance on Pandemic Unemployment Assistance
Let’s break that down a little.
The first part of this is official sounding mumbo jumbo. It states an independent contractor may qualify for benefits if “he or she is unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited his or her ability to continue performing his or her customary work activitie, and has thereby forced the individual to suspend such work activities.”
In other words, if the effects of the pandemic have impacted your ability to earn and have forced you to stop, you would qualify.
The problem here is, how do you determine what exactly ‘severely limited’ really means?
One answer to that would be an example they list in their guidance. They talk about a driver for a ride sharing service. That driver would qualify if the restriction of movement has made “continued operations unsustainable.”
How would that apply to delivery work?
The example for a ride share driver makes sense. Ride sharing is down dramatically during this time of social distancing. The lack of available riders means fewer fares, and it would not be hard to make a case that business was unsustainable.
What about delivery? Isn’t the delivery business kind of booming right now?
The thing is, while there may be more deliveries, some are finding that the work is not sustainable.
More drivers are signing on and the market is flooded. More drivers means fewer deliveries available. Many drivers are reporting that a lot of restaurants are taking longer due to all the restrictions around how many people can be in the restaurant.
While deliveries as a whole may be up, an individual may not be able to make enough for the work to be sustainable.
Using unemployment guidelines related to natural disasters
The DOL Guidelines clarify eligibility somewhat. It refers to Title 20, CFR 625.5. That title provides employment unemployment insurance guidance for natural distasters.
In that documentation, they define more fully that lack of work or loss of revenues has to result from “lack of work, or loss of revenues, provide that, prior to the disaster, the… business in the case of a self employed individual, received at least a majority of its revenue or income from an entity in the major disaster area that was either damaged or destroyed in the disaster, or an entity in the major disaster area closed by the federal, state, or local government in immediate response to the disaster.“
More mumbo jumbo, I know.
Essentially if a significant part of your revenue is lost due to customers who were impacted by the disaster (or in this case, pandemic), you might qualify.
A lot of restaurants have been closed down due to this. Is that enough to satisfy that? Or is the fact that we are actually paid directly by Grubhub, Doordash, Postmates, Uber Eats and others enough to say that we haven’t been impacted enough?
The bottom line is, there’s enough there to say we might qualify. And there’s enough to say that we might not.
In the end, it’s going to come down to the state, as they are the ones to interpret whether or not you qualify.
Can you apply yet?
Some states are supposedly accepting applications as of the date of this article.
One of the most useful documents that I found was put out by Associated Builders and Contractors, a trade organization for builders and contractors. I don’t know how often they will keep this updated or if future updates will show up under this same link, but they put out a document that shows a state by state listing of the status for applying for PUA benefits.
As of the time of this writing, it gave the status up to April 8, and included whether they were ready to take applications, and provided a link for where you apply.
Each state will handle this differently. Some require that you apply for regular benefits, get rejected, and then reapply under the PUA. Others want you to wait for them to have things in place.
Should You Apply?
I don’t have a good answer.
If you have a significant reason for staying home due to you or someone in your household already being impacted by this virus, I think you’ve got a good chance of qualifying. If the market has really dried up and it’s difficult to earn a living out there, you may qualify.
There are no guarantees.
I think the main thing is always be aware of your options. Ultimately you have to decide whether delivery is a good idea for you.
I’ve been home for two weeks now, and honestly I’m not sure when I want to go back out. I didn’t feel forced to stay home. Because of that, I think I’d have a hard time making a case for unemployment.
This is such an interesting time especially in our industry. Some people are making more money than ever. Others are really struggling.
How is this impacting you? Do you think you will apply?
I’d love to hear from anyone who has applied and received a decision one way or the other. Please leave a comment or send an email to Ron@EntreCourier.com.