A federal judge in California handed a major win to Grubhub and other “gig economy” companies on February 8, 2018, ruling that one of the delivery app’s drivers is not entitled to rights afforded to employees, like the minimum wage and overtime pay, according to Bloomberg Law. The decision, which strikes at the heart of the business model on which delivery apps rely, could well be a watershed moment in the reshaping of American employment relationships.
Judge: Grubhub Driver Is Independent Contractor
Raef Lawson, an actor in Los Angeles, is an independent contractor, not an employee, according to a new ruling from Magistrate Judge Jacqueline Corley, who sits on the US District Court for the Northern District of California.
Lawson made deliveries for Grubhub over the course of four months, hoping that the app’s flexibility would allow him to make money on the side as he pursued his dreams. What he quickly learned, according to his lawsuit, was that Grubhub isn’t actually the free-for-all work opportunity he’d initially thought.
Driver Says “Shifts,” Employer Control Make Him Employee
Lawson argued in court filings that Grubhub’s app provides early scheduling access to drivers who are faster and have better user ratings. This “priority scheduling” restriction, the actor claims, should be considered equivalent to enforcing mandated shifts, something that a bona fide employer does.
In a more global sense, Lawson claims, Grubhub controls most aspects of its delivery drivers’ working lives. That’s the hallmark of an employer, he says, which is why he should be considered an employee of Grubhub, not an independent contractor. And in pre-trial filings, Lawson demanded that Grubhub pay him all of the things that California State law affords to employees, including overtime wages, business expenses like gas and reimbursement for the days that he didn’t make the hourly minimum wage.
First Gig Economy Lawsuit Reaches Trial
Over the last five years, numerous drivers have filed suit and leveled nearly-identical arguments against the world’s largest delivery app companies. Ride-sharing innovator Uber, general delivery service Postmates and food delivery app DoorDash have all found themselves the target of employment lawsuits over the issue.
The California Grubhub case, however, is the first of these lawsuits to reach trial; previous claims were either dismissed or settled. In 2016, Uber attempted to settle an employment classification class action for $100 million, but the offer was rejected by a federal judge in California as inadequate.
Is Grubhub A Tech Company Or An Employer?
At the heart of these lawsuits is the question of how to classify the drivers who use delivery apps. The companies who make and maintain the apps argue that the drivers are independent contractors who aren’t entitled to basic labor protections, like the minimum wage, or employment-related cost off-sets, like reimbursement for their working expenses.
To back up this argument, Uber, Grubhub and their peers position themselves as pure technology interests. The companies make apps that connect people to one another, namely someone who needs a service and someone who can provide it, they argue. As Michele Maryott, a lawyer for Grubhub, claimed shortly after the recent decision, the drivers who use these apps enjoy “tremendous freedom and flexibility.”
From this perspective, the companies say, all of these drivers are clearly independent contractors. But many drivers dispute these claims, arguing that companies like Grubhub and Uber exert a significant amount of control over how, when and where they work.
The Borello Test & Employer Control
Raef Lawson attempted to make the same argument, but he was unsuccessful.
In considering the case, Judge Corley used the Borello test, a standard for judging the conditions of employment adopted by California’s Supreme Court in a 1989 case. The main thrust of the Borello test is control; bona fide employers exert substantial control over their workers. Independent contractors, on the other hand, have the freedom to run their businesses according to their own personal decisions. Lawson’s working situation, Judge Corley writes, fails the Borello test.
“While some factors weigh in favor of an employment relationship,” the Judge says, “Grubhub’s lack of all necessary control over Mr. Lawson’s work, including how he performed deliveries and even whether or for how long, along with other factors persuade the Court that the contractor classification was appropriate for Mr. Lawson during his brief tenure with Grubhub.”
Driver Controlled Most Aspects Of Job, Court Says
In reviewing the case, Judge Corley found that Lawson was able to set his own hours, decide how to make deliveries, plan his own delivery routes and could wear whatever he wanted while he was working.
There’s no training requirement before a driver starts working. While Grubhub sends new drivers a series of training videos, the company doesn’t check whether or not they watched them. And, though Grubhub offers branded hats and shirts, it doesn’t require that drivers actually wear them. Nor does the company require that drivers use a branded insulated bag to transport food.
Including Whether Or Not To Work
Even more important, Grubhub doesn’t require that its drivers do any work. Lawson signed up to become a Grubhub driver in August 2015; he didn’t make any deliveries until two months later. During the interim, Grubhub never contacted him.
That’s not unusual, Judge Corley writes. Around 40% of the people who sign up to become Grubhub delivery drivers never make a delivery. At the same time, Lawson was free to work for Grubhub’s competitors. During his tenure at Grubhub, Lawson also delivered for Postmates and Caviar. He even delivered for Caviar when he was already working a scheduled “block” for Grubhub.
Working Relationship Is “All-Or-Nothing”
“Under California law, whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition,” Judge Corley writes. “If Mr. Lawson is an employee, he has rights to minimum wage, overtime, expense reimbursement and workers compensation benefits. If he is not, he gets none. 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. In the meantime the Court must answer the question one way or the other. Based on what the Court observed at trial and the facts found, and after applying the Borello test, the Court finds that during the four months Mr. Lawson performed delivery services for Grubhub he was an independent contractor.”
How Compensation Works For Grubhub Drivers
Another wrinkle came in December 2015, when Grubhub amended its driver contract. Under the amendment, Grubhub would notify drivers of new deliveries through the app and offer a set fee as compensation. Drivers have the freedom to accept or reject the offer at their discretion. In effect, drivers can set their own wage by accepting only those fee offers they find acceptable.
It’s possible that Lawson was just the wrong plaintiff for this case.
During the trial, Lawson couldn’t bring himself to deny “gaming the app” to earn extra compensation. When drivers use Grubhub, they sign up for scheduled “blocks,” periods of time when they agree to accept delivery offers. Again, they have every right to deny the offer if the delivery fee is too low.
“True Up” Pay
But drivers who accept at least 85% of the orders they receive become eligible for “true up” pay; Grubhub will guarantee that you make at least $11 per hour, regardless of how much you make off your actual deliveries.
At the same time, Grubhub allows drivers to request that deliveries be re-assigned, in the case that you get a flat tire, run out of gas or just don’t want to make the delivery anymore. Lawson took advantage of this scheme, Judge Crowley says, by accepting orders he had no intention of making, just to maintain a high acceptance rate.
“Gaming The App”
On one day, for example, Lawson signed up for a four-hour block between 6 p.m. and 10 p.m. When the block started, he put himself outside of his delivery zone, too far away from any customers or restaurants to receive a delivery offer. Then, at some point, Lawson came back “in network” and accepted an offer, but there’s no record that he either picked up or delivered the order. But crucially, because he had accepted 100% of his offers during the block, Lawson was still paid the full “true up” amount, at the time $60.
Ultimately, Lawson’s Grubhub account was terminated over this conduct, a breach of the company’s Delivery Service Provider Agreement. Similarly, his Postmates account was deactivated a month later for attempting to receive “a payout despite no effort on [his] part to complete the delivery.”
Plaintiff Was “Not Credible,” Judge Writes
All in all, Judge Corley just didn’t find Raef Lawson to be “credible.” During the case’s discovery phase, Lawson produced a resume on which he claims to have been enrolled in the Loyola Marymount University Master of Fine Arts program between August 2012 and May 2015. In reality, he was only enrolled for a year.
Questioned over the discrepancy, Mr. Lawson said that he’d listed all three years of the program because he “still [felt like] part of [the Loyola Marymount] community.” More pertinently, after being removed from the Grubhub network, Lawson signed up to the app again under a false name (“Ray Lawson”) and “falsely represented that he had never before driven for Grubhub.”
Legal Team Plans Appeal
Lawson’s case is far from over. In an email to Ars Technica, his attorney, Shannon Liss-Riordan, told reporters that she and her client plan to appeal the Court’s decision. Liss-Riordan notes a concurrent case in which the California Supreme Court could adopt a stricter test for employment status. So the Borello test, which was used as a standard in Lawson’s case, could be on the chopping block shortly.