GrubHub Wage Trial Could Deliver Message in Heart of Gig Economy

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By Jon Steingart

A trial underway in a federal court in San Francisco could have a big impact on whether gig workers are classified as employees or independent contractors ( Lawson v. GrubHub Holdings, Inc. , N.D. Cal., No. 3:15-cv-05128, trial 9/11/17 ).

Former GrubHub food delivery driver Raef Lawson says he was an employee and the company owes him overtime and reimbursement for business expenses that he’d be entitled to under California law if he had been classified correctly. Lawson provided provided delivery services for five months beginning in October 2015. He also wants to represent other drivers in a class action against the company.

But GrubHub argued at trial that it just connects customers with restaurants and, to a smaller extent, with delivery drivers. Lawson had control over how he provided deliveries, such as the hours he worked and the packaging he used for transporting items, the company argued at trial.

The outcome “will be closely watched and could have a ripple effect” on similar companies, Shannon Liss-Riordan, a lawyer for Lawson, told Bloomberg BNA. Lawsuits alleging misclassification of workers by other on-demand companies, such as Uber Technologies Inc. and Postmates Inc., have ended in settlements. Lawson’s is the first to reach trial.

Lawson is trying to represent other California GrubHub drivers who say they were misclassified, although this phase of the trial focuses only on whether he was misclassified. If he prevails on this issue, a later phase will decide whether he can make the misclassification claim on behalf of other drivers.

Evidence in the first phase wrapped up last week. The parties will submit post-trial briefs and appear for closing arguments for this phase Oct. 30, before Magistrate Judge Jacqueline Scott Corley in the U.S. District Court for the Northern District of California. She could rule at any time afterward.

San Francisco Is Gig-Economy Central

In one sense, the impact will be limited. A federal district court doesn’t create precedent the way a court of appeals does. But a ruling that Lawson is an employee could still have far-reaching reverberations, especially given where it’s happening.

“It would be cited as at least being persuasive,” Ian Schaefer, a member of Epstein Becker & Green P.C., in the law firm’s employment, labor, and workforce management practice, told Bloomberg BNA. “This is the heart of the gig economy in California. I think it would have instructive effect and an impact on litigation and the arguments of litigants going forward.”

“There’s this concept that the gig economy is startup companies where everybody is engaged as a contractor, and it’s on demand, and it’s all app-based,” Schaefer said.

“The reality is that everyone’s operating in a gig economy, every company,” he said. Schaefer co-leads Epstein Becker’s technology, media, and telecommunications service team and is co-editor of its Technology Employment Law blog.

“It’s not new—we’ve had temp agencies for 50 years—but the lines between traditional employee and more flexible employee are becoming more blurred,” Schaefer said. “The gig economy affects not just emerging companies in Silicon Valley, but it affects Fortune 100 companies equally.”

Lawson’s lawyer took issue with the company’s argument that all it did was connect customers looking to pay for food delivery with drivers willing to provide it. “Contingent work is not new, nor is it new for companies to claim they are just connecting customers with workers,” Liss-Riordan told Bloomberg BNA. “That’s called an employer.”

Although Lawson theoretically could sign up for whichever shifts he wanted, the company reserved slots during more lucrative times for drivers who completed deliveries in shorter times, he said. It encouraged drivers to wear clothing and use materials that carried GrubHub branding by cutting rental fees if they wore GrubHub-branded clothing, he said.

Who’s in the Driver’s Seat?

“Raef Lawson took full advantage of the freedom and flexibility that his partnership with Grubhub afforded him by deciding when, where and how frequently he performed deliveries,” the company said in a statement emailed to Bloomberg BNA. “Grubhub believes that Delivery Service Partners value and benefit immensely from this type of independence, and it is often the reason they choose to partner with Grubhub in the first place.”

Linda Donahue, who briefs policy makers on classification issues, weighed in on the subject as well.

“If it is simply an app that connects someone in need of the service to someone who’s willing to provide that service, that’s one thing,” said Donahue, associate director of government relations at the School of Industrial and Labor Relations at Cornell University.

“If GrubHub is determining who has access to the work at hand then they’re controlling the scheduling of work,” she told Bloomberg BNA. “They’re controlling who has access to the work. They’re controlling what hours someone works.”

Controlling who receives access to work is a sign of an employee relationship, Donahue said. “If you’re an employee then your employer is entitled to give you work or not give you work because they’re the employer,” she said. “If you’re an independent contractor and there’s work available but you’re being denied access to it, that’s a different story.”

Lichten & Liss-Riordan P.C. attorneys Shannon Liss-Riordan and Thomas Fowler in Boston and Matthew Carlson in San Francisco represent Lawson.

Gibson, Dunn & Crutcher LLP attorneys Theodore J. Boutrous Jr., Theane Evangelis, and Dhananjay Manthripragada in Los Angeles and Michele Maryott and Kevin Ring-Dowell in Irvine, Calif., represent GrubHub.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editor responsible for this story: Terence Hyland at thyland@bna.com

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