United States: Victory For Grubhub In First-Ever Gig Economy Trial

Last Updated: February 9 2018
Article by Richard R. Meneghello

Three Things All Gig Economy Companies Need To Know About Decision

In what is believed to be the first time in our nation's history that a trial court has reached a judicial merits determination in a gig economy misclassification case, a federal judge in California ruled in favor of the company this afternoon and found that a delivery driver was properly classified as an independent contractor. By rejecting the driver's claim that he was actually an employee deserving of minimum wage, overtime, and other benefits associated with employee status, the court handed gig economy companies everywhere a groundbreaking victory.

What do all gig economy companies (and other businesses using a freelance or independent contractor model) need to know about today's historic ruling in the Lawson v. Grubhub trial? Here are the three key takeaways from the ruling.

The Court Found That Grubhub Did Not Have The "Right To Control" Its Drivers.

By way of quick background, this case involves a former GrubHub driver named Raef Lawson who first attempted to bring a class action lawsuit against the on-demand food delivery service, claiming that he and many other delivery drivers should have been classified as employees instead of independent contractors. The judge did not allow him to proceed with a class action, however, only permitting him to proceed with a claim for under $600 in allegedly unreimbursed expenses—to which he would only be entitled if he is found to be an employee, not a contractor.

If he made it past the initial misclassification hurdle in the judge's eyes, however, his attorney indicated it would open the door to thousands of similar drivers prevailing under California's notorious Private Attorneys General Act (PAGA). More significant, however, was the possibility that such a ruling would start a snowball effect and lead to other rulings against gig economy companies, given that the overwhelming number of businesses in this new realm—think Uber, Lyft, Postmates, Handy, TaskRabbit, and others—use an independent contractor system with their workers.  

The case went to a bench trial in September, the parties made their final arguments in written briefs soon thereafter, and closing arguments were heard on October 30. Over three months later, Judge Jacqueline Scott Corley issued her final ruling today, and businesses operating in the gig economy can certainly say it was worth the wait.

The key to her decision: a finding that Grubhub lacked necessary control over the driver's work to be considered an employee. In California, as in most other states, the principal test of an employment relationship is whether the business has "the right to control the manner and means of accomplishing the result desired." Judge Corley found the following:

  • Grubhub exercised little control over how Lawson made his deliveries, not interfering with his choice of vehicle;
  • The company didn't control his appearance, not requiring him to wear a special uniform or meet any appearance standards;
  • Grubhub had no particular training or orientation that drivers needed to attend;
  • The driver could have had anyone he wanted accompany him while making deliveries;
  • Lawson, not Grubhub, controlled whether and how he worked and for how long;
  • Drivers could cancel their shifts right up to the time they were to start with no apparent negative consequences; and
  • Grubhub prepared no performance evaluations for their drivers.

While Certain Other Factors Pointed To An Employee-Employer Relationship, They Were Ruled Not To Be Determinative.

This wasn't a slam-dunk decision in favor of Grubhub, however. The judge was troubled by the fact that several "secondary" factors pointed to an employer-employee relationship between Grubhub and its drivers. Specifically, she noted that Lawson was not engaged in a distinct occupation or business; that no special skills were necessary to operate as a delivery driver; that he and other drivers were essentially paid by the hour rather than by delivery; and that delivering food—the very task that drivers are retained to perform—is a regular part of Grubhub's business. These factors often lead courts to conclude that the individual in question should be classified as an employee.

However, she also pointed out that additional secondary factors weighed in Grubhub's favor: for example, the company did not provide him any tools for his work, and neither party contemplated the work to be long-term or regular, but instead episodic and at the driver's convenience. At the end of the day, the judge was forced to weigh all of the factors, both primary and secondary, and make a ruling that included consideration of all relevant aspects of the relationship. "Considering all the facts, and the case law regarding the status of delivery drivers," the judge concluded, "the court finds that all the factors weighed and considered as a whole establish that Mr. Lawson was an independent contractor and not an employee."

The Judge Made A Call To The Legislature And Regulators To Modernize Legal Standards And Adjust To The Gig Economy.

Judge Corley's conclusion sends a clarion call to government officials in California (and in some senses, across the country) to adapt their statutory and regulatory tests to meet the demands of the 21st-century workplace. "Under California law, whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition," she said. She noted that a finding in Lawson's favor would have resulted in him being entitled to a multitude of employment rights, whereas a ruling against him leaves him with nothing. "With the advent of the gig economy, and the creation of a low-wage workforce performing low-skill but highly flexible episodic jobs, the legislature may want to address this stark dichotomy."

What Does This Decision Mean For Gig Economy Companies?

This decision is a significant step for gig economy companies and any other business that uses a freelance or contractor model. It provides the closest thing we will get to a blueprint when it comes to structuring operations to meet the legal tests established by the courts to answer a misclassification question. While we may never achieve absolute certainty, this case offers a step-by-step analysis of some very common factors in place at many gig economy businesses and points out which tip the scale towards contractor status and which point more towards employee status.

To be clear, this case only applies California law, and may only be binding in federal court cases. However, given the fact that misclassification tests across the country are so similar in nature, this ruling could be helpful to companies everywhere that seek to capitalize on the new gig economy workforce springing up from coast to coast.


The gig economy is not going away. Instead, it grows with leaps and bounds, expanding well beyond on-demand rideshare and delivery driver companies and entering such fields as the healthcare, hospitality, and even government services industries. Because of this growth, it is incumbent upon government regulators to react and restructure legal standards to face the changing standards that define modern workplace relationships. Judge Corley's conclusion makes this very point, and may spur action from other branches of state and federal government.

We may not have heard the last from this case. Given how much is at stake, it is likely that Lawson will appeal the ruling to the 9th Circuit Court of Appeals. And given the fact that the California Supreme Court is actively considering whether to loosen the very legal standards that led to today's Grubhub victory, we could even see a reconsideration of today's ruling if the misclassification test gets changed. Whatever happens in the future, the Fisher Phillips Gig Economy Practice Group stands ready to advise its clients on the impact of today's ruling and any changes that occur in the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Richard R. Meneghello
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions