Editorial Team When you misclassify just 10% of your workforce as contractors, a state can lose millions in tax revenue. That’s not a hypothetical, it’s from a recent economic analysis, and it shows why the legal ground is shifting under the gig economy. For workers, that same misclassification can mean losing hundreds of dollars in benefits every year. For a company like DoorDash operating in a city like Seattle, this all boils down to one question: just how long can the contractor model survive when legislators and judges are scrutinizing it this closely?
Key Takeaways
- Seattle’s PayUp ordinance, kicking in as of January 2024, forces gig companies to provide minimum pay and benefits, directly attacking the flimsy contractor model.
- The Washington Supreme Court isn’t helping the gig companies. A 2023 ruling in Washington State Major League Baseball Stadium Public Facilities District v. Department of Revenue continues the state’s trend of interpreting “employee” as broadly as possible.
- If you operate in Seattle, you have to change how you do business. This means paying up with guaranteed minimum earnings and paid sick time for your gig workers.
- The cost of reclassifying workers as employees is huge and goes way beyond wages, pulling in unemployment insurance, workers’ comp, and the employer’s side of payroll taxes.
The Seattle PayUp Ordinance: A Minimum Standard for Gig Workers
Seattle’s PayUp ordinance became fully effective in January 2024, and it’s a direct attempt to force some structure onto the gig economy’s chaotic pay schemes. The law sets a minimum per-minute and per-mile rate for app-based workers, which means DoorDash Seattle drivers have a floor for their earnings. The rate is set at a minimum of $26.40 per hour of engaged time, with an added 69 cents per mile, and that’s all before tips and expenses are factored in. That figure gets adjusted for inflation each year, a far cry from the old model where pay was a black box of individual delivery rates that often fell below minimum wage once you counted all the waiting and driving.
PayUp’s goal is pretty simple: make sure a gig worker gets a fair, predictable wage even when demand is all over the place. This completely upends the independent contractor model, which is built on the idea that the worker assumes all the business risk. While the ordinance stops short of calling these workers “employees,” it saddles companies with a lot of the same financial duties, like minimum earnings and paid sick leave. What you get is a messy situation where the line between contractor and employee is practically gone, even if the legal definition hasn’t technically changed. So now companies have to figure out if they’ll eat these new costs, push them onto customers, or completely rebuild their business model.
Washington Supreme Court’s Broad Interpretation of “Employee”
The legal ground in Washington State has always been tilted toward a broad reading of who qualifies as an “employee,” and the state’s Supreme Court hammered this point home in its 2023 decision, Washington State Major League Baseball Stadium Public Facilities District v. Department of Revenue. That case didn’t involve gig platforms, but its analysis of the “employee” definition for tax purposes sent a clear message. The court made it plain that they look at the substance of the relationship, using an expansive view of the common law control test, and don’t care what label the parties put in their contract.
This precedent is a huge problem for DoorDash Seattle and its competitors. It means that even with an ironclad independent contractor agreement, Washington courts will look past the paper and examine the reality on the ground. They’ll ask questions about the actual control the company has over its workers, does DoorDash set the delivery routes, use strict performance metrics to punish drivers, or prevent them from working for other apps? If the answer is yes, a court could easily find an employment relationship exists. This legal reality, combined with new laws like PayUp, makes it extremely tough for gig companies to defend their business model from legal challenges.
The Financial Burden of Reclassification: Beyond Wages
If drivers are reclassified as employees, the financial hit to a company like DoorDash is about a lot more than just paying a higher hourly rate. Once drivers in Seattle are legally considered employees, the company suddenly gets a whole new set of bills that the contractors used to pay themselves. You’re talking about the employer’s share of payroll taxes (Social Security and Medicare), which contractors currently pay as self-employment tax. Then you have to add unemployment insurance premiums, payments into workers’ compensation funds via the Washington State Department of Labor & Industries, and maybe even health insurance offerings under the ACA, depending on hours worked.
And that’s not all. The whole concept of who pays for business expenses like car maintenance, gas, and depreciation gets flipped on its head. As contractors, drivers deduct these costs from their own income. As employees, those costs would almost certainly become the employer’s problem, paid either through direct reimbursement or a much higher wage. This isn’t a small line item. A typical DoorDash driver in Seattle can put hundreds of miles on their car in a week, and reimbursing that mileage at the 2024 federal rate of 67 cents per mile adds up fast when you have thousands of drivers. This is a fundamental change to the entire economic foundation of the gig business.
The “ABC Test” and Its Shadow Over Washington
Washington State may not have a blanket “ABC test” for every worker classification scenario, but the test’s core ideas show up all the time in state law, especially for unemployment and workers’ comp. For those who don’t know, the ABC test (used famously in California and Massachusetts) starts by assuming a worker is an employee. The company can only overcome that assumption by proving all three of these things:
- The worker is free from the company’s control and direction.
- The worker’s job is outside the usual course of the company’s business.
- The worker has their own independently established trade or business doing that same type of work.
That second point, that the work is “outside the usual course of the hiring entity’s business”, is the real killer for gig delivery companies. DoorDash is in the delivery business. The drivers perform the deliveries. Their work is the *core function* of the business, not some ancillary task. This makes it almost impossible for them to pass that part of the test. So even without an official ABC test on the books for everything, Washington courts and agencies are already thinking along these lines, asking whether the worker’s job is integral to what the company does. That judicial mindset means the spirit of the ABC test hangs over every classification case in the state.
Challenging the Conventional Wisdom: The True “Flexibility” Argument
The standard argument from gig company lobbyists is that drivers love being independent contractors because it gives them flexibility to set their own hours. This is supposedly the main reason we should leave the whole system alone. But that line of reasoning really glosses over the harsh reality for drivers, especially in an expensive city like Seattle. Sure, choosing your own hours is a perk, but that “flexibility” often means no stability, no benefits, and no fair pay. How flexible is your life, really, if you can’t consistently make rent or go to a doctor?
There’s a false assumption that you can’t have both employee status and a flexible schedule. That’s just not true. Plenty of modern employment setups include flexible scheduling, part-time roles, and even systems where you pick your own shifts, all while giving workers basic protections like a minimum wage and workers’ comp. The real issue isn’t about protecting flexibility. It’s about designing a work model that includes it without stripping away fundamental labor protections. The conversation should be about how to give workers both flexibility and security, because pretending they have to choose between the two ignores the economic realities that force people into gig work to begin with.
Seattle’s shifting legal and regulatory ground is a direct threat to the contractor model that DoorDash and other platforms rely on. These companies need to get ahead of this, look hard at how they operate and pay people, and adapt to the new rules, or they’re going to face serious legal and financial trouble. This push for greater worker protections isn’t just happening in Seattle. It’s part of a much larger national debate about what work should look like.
What’s the main effect of Seattle’s PayUp ordinance on DoorDash drivers?
The PayUp ordinance gives DoorDash drivers in Seattle a safety net. It guarantees them a minimum payment for their engaged time and miles driven, plus paid sick time, making their earnings more stable and fair than what they had before.
Does PayUp make gig workers into employees?
No, not officially. The PayUp ordinance doesn’t formally reclassify gig workers as employees. But by forcing companies to provide employee-like financial benefits, it makes the practical difference between the two classifications very blurry.
How does Washington law usually define an “employee”?
Washington law, backed up by its Supreme Court, takes a very broad view of the term “employee.” Courts look at the real-world power dynamic, how much control a company has over the worker, instead of just accepting the “contractor” label in an agreement.
What are the big financial hits for a company if its contractors get reclassified as employees?
If contractors become employees, the company is on the hook for a lot more than just wages. They have to pay their share of payroll taxes (Social Security, Medicare), cover unemployment insurance and workers’ comp, and possibly offer health benefits and reimburse expenses.
Does Washington State use the “ABC test” for worker classification?
Not for everything, but its logic is very influential, especially in unemployment and workers’ comp cases. Because the ABC test makes it nearly impossible for a gig company to prove a driver’s work is “outside the company’s usual business,” its principles present a major threat to their contractor model in the state.
