In a ruling seen as a victory for Grubhub and its gig economy counterparts, a federal judge in California ruled in the case of Raef Lawson v Grubhub Inc., that the delivery platform does not owe its drivers the benefits of an employment relationship – like minimum wage, overtime pay or workers compensation.Though the case may be appealed, it’s the first such case to reach trial, and may shape the legal relationship between contractors and the digital platforms they rely on.
Grubhub is an internet food ordering service that connects diners to local restaurants. Customers order food through Grubhub’s online platform and Grubhub transmits the orders to restaurants. The food is then delivered either by a restaurant delivery person or a Grubhub driver. Diners may also pick up their own meals ordered through Grubhub.
Grubhub operates in 1,200 markets in the United States. Of those markets, 250 are in California and of those Grubhub offers its own delivery services in five. As of June 2016, there were 4,000 Grubhub delivery drivers in California.
By providing delivery services, Grubhub increases the number of restaurants it can offer to diners on its online platform. In the five California markets where Grubhub offers delivery services, the majority of Grubhub’s diners have their meals delivered by the restaurants. For the remaining customers, Grubhub delivers meals more than the customers pick up the food themselves. The percentage of Grubhub-provided deliveries is growing.
Raef Lawson worked as a restaurant delivery driver for Grubhub in Southern California for four months in late 2015 and early 2016. He complains that Grubhub improperly classified him as an independent contractor rather than an employee under California law and in doing so violated California’s minimum wage, overtime and employee expense reimbursement laws.
He brings his claims in his individual capacity and as a representative action pursuant to the California Private Attorney General Act (PAGA). The critical question is whether under California’s common law Borello test, Mr. Lawson was an employee or an independent contractor.
Prior to performing Grubhub food deliveries, Mr. Lawson worked for other so-called “gig economy” companies, including Lyft, Uber, Postmates, and Caviar. He drove for these companies, including Grubhub, because the flexible scheduling allowed him to pursue his acting career. Mr. Lawson continued to deliver food for Postmates and Caviar during the four months he was delivering for Grubhub.
After considering all of the Borello factors as a whole in light of the trial record, the Court found in its February Opinion that Grubhub has satisfied its burden of showing that Mr. Lawson was properly classified as an independent contractor.
Grubhub exercised little control over the details of Mr. Lawson’s work. Grubhub did not control how he made the deliveries. Nor did it control the condition of the mode of transportation Grubhub also did not control Mr. Lawson’s appearance. He was not required to have any Grubhub signage on his car. It did not require Mr. Lawson to undergo any particular training or orientation. Mr. Lawson, rather than Grubhub, controlled whether and when Mr. Lawson worked, and for how long.
While some factors weigh in favor of an employment relationship, 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.