United States: California Federal Court Rules In California's First "Gig Economy" Case That Grubhub Delivery Driver Was Properly Classified As An Independent Contractor

The influx of "gig economy" employers that contract with independent workers for short-term engagements, like Uber, Lyft, and Postmates, has carried with it corresponding uncertainty as to whether these "gig" workers are properly classified as independent contractors, or whether they should be considered employees under California law. "Gig economy" companies can breathe a small sigh of relief after the United States District Court for the Northern District of California ruled in favor of independent contractor status for these workers in what is believed to be California's first "gig economy" misclassification case tried to verdict.

On February 8, 2018, federal Judge Jacqueline Scott Corley ruled that a four-month GrubHub delivery driver was properly classified as an independent contractor, and not an employee. While not a slam dunk victory for California "gig economy" companies due to the fact-intensive analysis required in misclassification cases, these companies now have some insight as to how California courts may apply the decades-old rubric to their innovative, twenty-first century business models in determining whether a worker is properly classified as an independent contractor.

I. THE FACTS.

The plaintiff, Raef Lawson ("Lawson"), a four-month delivery driver for GrubHub, brought a wage and hour class action, as well as a representative claim for penalties under California's Private Attorneys General Act ("PAGA"), alleging that he was improperly classified as an independent contractor. He also alleged that GrubHub deprived him of various wage and hour protections due to employees under California Law, such as overtime, minimum wage, and employee expense reimbursements. The case was subsequently removed to the Northern District of California, which granted GrubHub's motion to deny class certification on the basis that Lawson was not a typical or adequate class representative. The parties continued to litigate the PAGA claims.

Lawson worked as a delivery driver for GrubHub, an internet food ordering service that connects diners to local restaurants. After ordering through GrubHub's online platform, customers have the option of picking up their food or having a restaurant delivery person or GrubHub driver (like Lawson) deliver their food.

Lawson had a history of "gig economy" work for companies like Uber, Lyft, Postmates, and Caviar due to flexible scheduling that allowed him to concurrently pursue other career aspirations. As part of his online application to GrubHub in August 2015, Lawson executed a "Delivery Service Provider Agreement" ("Service Agreement") that set forth various terms, including the independent contractor relationship, GrubHub's inability to restrict drivers from working for its competitors, the lack of any minimum period that drivers must make themselves available, drivers' required use of personal equipment (i.e., smartphone, vehicle) to complete deliveries, the applicable service fees paid to drivers, the initial 60-day term of the Service Agreement (subject to automatic renewal), and the mutual right to terminate the contractual relationship. GrubHub did not require its drivers to attend mandatory training as part of the onboarding process. It only required drivers to undergo a generic background check. Similarly, drivers were not required to wear uniforms, place GrubHub signage on their vehicles, or use GrubHub-branded food warming bags.

Although Lawson applied to GrubHub in August 2015, he delayed in performing any deliveries until October 2015 without consequence. Once a week, GrubHub released schedules of two to five hour shifts, called "blocks," through an online program. Drivers like Lawson set their own schedules by signing up for "blocks" when they wanted to work, or simply refraining from signing up at all if they did not want to work. GrubHub did not assign or require drivers to sign up for scheduled "blocks." When Lawson did sign up for a "block," he often logged on to the online application up to 30 minutes late without consequence. Notably, Lawson also admitted to exploiting GrubHub's application by scheduling himself as "available" for deliveries when he had no intention of accepting them, in order to maximize his earnings with minimal-to-no work, since GrubHub employs a formula that rewards drivers who are more "available" with higher payment.

While working for GrubHub, Lawson concurrently delivered for GrubHub's competitors, Postmates and Caviar. In fact, Lawson performed deliveries for these competitor companies during his scheduled "blocks" with GrubHub.

In February 2016, GrubHub terminated its relationship with Lawson for breaching the Service Agreement by failing to make himself available and/or failing to perform deliveries during a high proportion of his scheduled "blocks."

II. GRUBHUB'S LACK OF CONTROL WAS THE SINGLE MOST IMPORTANT FACTOR IN ITS ANALYSIS OF THE WORKING RELATIONSHIP.

The Court analyzed Lawson's status as an independent contractor versus employee of GrubHub under the multi-factor test set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989). The single most significant factor that the Court emphasized was GrubHub's lack of control. GrubHub had little to no control over Lawson's work, including how he performed his deliveries, the means of transportation used to effectuate deliveries, Lawson's appearance while performing deliveries, or the amount of time Lawson took to complete such deliveries. Lawson delayed two months to perform his first delivery after applying to GrubHub and regularly denied deliveries without any negative consequence. GrubHub did not require Lawson to wear a uniform, use equipment donning GrubHub's logo, or put GrubHub signage on his vehicle. GrubHub had no control over what scheduled "blocks," if any, drivers chose to sign up for. In fact, GrubHub did not regulate drivers' passengers when performing deliveries, their particular delivery routes, or ability to work for its competitors—even when simultaneously signed up and logged on to GrubHub's scheduled "block" of availability. Aside from controlling the governing fee rates, availability of scheduled "blocks," and geographic boundaries for delivery zones, GrubHub exerted little to no control over its drivers and their performance of deliveries, all which weighed strongly in favor of an independent contractor relationship.

In addition to the "control" factor under Borello, the Court analyzed several other factors. For example, the lack of skill in food delivery and hourly (versus per delivery) compensation model weighed in favor of an employment relationship. However, the remaining factors overwhelmingly favored an independent contractor relationship, including GrubHub's "distinct occupation or business" as a "software provider" (and not a "delivery service," although delivering food was part of GrubHub's usual business); the drivers' lack of tools or equipment to perform deliveries; and the brief initial 60-day term in the Service Agreement (albeit automatically renewable). In sum, the Borello factors overwhelmingly favored Lawson's status as an independent contractor, with the Court's particular emphasis on GrubHub's lack of control over Lawson.

III. WHAT CAN CALIFORNIA COMPANIES EXPECT NEXT?

The Court's ruling in Lawson v. GrubHub is the first of many pending California "gig economy" misclassification cases to go to verdict. Due to the highly fact-sensitive nature of misclassification cases, the Court's analysis in Lawson, when applied to a different fact pattern, may yield an entirely different outcome depending on the detailed nuances in working conditions, or varying jurisdictional laws and standards. However, the Court's ruling in Lawson sheds some light on California courts' handling and analysis of "gig economy" cases to effectively guide such companies when building, restructuring, or defending their business models. Lewis Brisbois' Labor & Employment Group will continue to closely follow the anticipated developments in California's litigation of "gig economy" workers.

The case is Raef Lawson v. GrubHub Inc. et al., case number 3:15-cv-05128, in the U.S. District Court for the Northern District of California.

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.

Authors
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
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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.

Disclaimer

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.

General

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