The Class Action Weekly Wire – Episode 123: Delivery Drivers Seek Approval For $24.8 Million Misclassification Class Action Settlement (Video)

Duane Morris Takeaway: This week's episode of the Class Action Weekly Wire features Duane Morris partners Jerry and Daniel Spencer Quay with their analysis of a proposed $24.8 million settlement to resolve misclassification claims brought by delivery drivers in 2015.

Episode Transcript

Jerry Maatman: Thank you again for being here, our loyal blog readers and listeners, for our next episode of our weekly podcast series entitled The Class Action Weekly Wire. I'm Jerry Maatman, a partner at Duane Morris, and joining me today is my colleague, our newest partner, Daniel Spencer of our Los Angeles office. Welcome.

Daniel Spencer: Thanks, Jerry. Great to be here. I appreciate you having me.

Jerry: Today, we're here to discuss a nearly 10-year settlement in the making in a case called Lawson v. Grubhub. Daniel, can you give us some background on the case and what the plaintiffs' claims are all about?

Daniel: Absolutely. So, this case has been around for quite some time. It kicked off in late 2015 when a former Grubhub driver, Raef Lawson, filed a suit in California. He claimed Grubhub misclassified him and thousands of others in independent contractors when they were actually employees. Lawson brought his claims for unpaid overtime, failure to reimburse business expenses, and other violations of the California Labor Code. He also brought a representative claim under the California Private Attorneys General Act, and this set the stage for what turned into nearly 10 years of litigation.

Jerry: Let's start with the first major ruling, a bench trial in 2017. What happened there?

Daniel: That's correct. So, at the trial, the court ruled against Lawson, finding that he was an independent contractor and not an employee. The court concluded that Grubhub properly classified their drivers as independent contractors under the S.G. Borrello & Sons v. Department of Industrial Relations multi-factor test that was the law at the time. The original test evaluated how much control a potential employer had over the way a worker completed his assigned tasks. To determine whether a worker was classified as an employee or an independent contractor, there were multiple factors that an employer had to look to, such as whether the employee or worker provided the tools for the job, the duration of the working relationship. And Lawson appealed that decision to the Ninth Circuit.

Jerry: While things weren't, complicated enough, in 2018, the California Supreme Court issued a ruling that replaced the Borrello test with what's known as a stricter ABC test from the Dynamex v. Superior Court case. The ABC test was then later codified into law with passage of Assembly Bill 5 in 2019. What impact did those developments have on the pending appeal?

Daniel: So, while the AB5 bill was coming into law, Lawson's appeal was stayed, and the California Supreme Court decided whether the Dynamex ruling would apply retroactively. In 2021, the Ninth Circuit vacated the earlier decision in favor of Grubhub and sent the case back to the district court. The district court was then instructed to determine whether the exemption under the ABC test applied, and if not, to apply the ABC test to the original case.

Jerry: So, we're back in the lower federal court. What was the outcome? Was it any different than the original bench trial?

Daniel: It was, and the Ninth Circuit vacated the decision. The district court ruled that the plaintiff was actually an employee in 2023. Then, the district court determined that a Grubhub delivery driver is an employee and not an independent contractor for minimum wage and overtime claims under the ABC test.

Jerry: Can you explain to our listeners what the ABC test entails and measures?

Daniel: The ABC test is a three-part test that an employer must meet if they want to classify a worker as an independent contractor. The worker is only an independent contractor if they meet all three parts of the test. The first part is the worker has to be free from control and direction of the hirer in relation to the performance of the work, both under the contract and in fact. The worker also, under the second part, has to perform work that's outside the usual course of the hirer's business. And finally, the third factor is that the worker is customarily engaged in an independent, established trade or occupation or business of the same nature as the work performed by the hirer. Grubhub tried to show that an exemption to the ABC test applied, but the court disagreed, holding that Grubhub's delivery drivers are necessary to Grubhub's business, which makes sense. That made Lawson an employee. The court awarded Lawson minimal damage for his individual minimum wage claims but found that Grubhub was not liable for any overtime compensation because Lawson didn't work any overtime hours.

Jerry: That's quite a turn of events, but I understand Lawson wasn't satisfied with the result, correct?

Daniel: No. And the parties ultimately agreed to settle the remaining claims under a deal that came together in April of 2024 Just before the remedies bench trial was set to begin, in August of this year, Lawson moved for preliminary approval of a $24.75 million settlement. That proposed class is about 60,000 drivers in California who use Grubhub for at least one delivery since December of 2014. Under the deal, each class member will get at least $25. The preliminary settlement includes a $100,000 service award for Lawson, $260,000 set aside for administration costs, and $2 million in PAGA penalties, most of which will go to the state.

Jerry: And I assume plaintiffs' counsel is interested in garnering a third of that settlement of $24.75 million?

Daniel: Yes, approximately 33%, which is fairly standard in large class actions of this type, especially ones that drag on for nearly a decade, like this case. If the court grants preliminary approval, the deal will move forward into the notice phase, there will be an opportunity for people to object, and then there will be a final settlement and approval hearing.

Jerry: Well, that's quite a journey. Dwight D. Eisenhower and the troops invaded Normandy on D-Day in lesser time than it took for this case to wind through the court system, but it's certainly a cautionary tale for employers in general, and gig companies in particular, in terms of what sort of impact misclassification decisions can have in terms of the litigation setting.

Well, thanks, Daniel, for your debut appearance on the podcast, and for explaining this settlement and what it meant, both to the parties and to other employers. And thanks for our loyal blog listeners for being here. We'll be watching this settlement closely in terms of the settlement approval process and bring you further PAGA and California-related class updates as they occur. So don't forget to subscribe to our blog and to our weekly podcast series, and we'll see you next time.

Daniel: Thanks, Jerry, it was a pleasure to be here.

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