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Federal Court Rules That GrubHub Drivers Are Independent Contractors, Not Employees
New gig economy companies like GrubHub, Uber and Lyft don’t have many “employees.” Instead, they rely on a business model that classifies the vast majority of their workers as “independent contractors.” This allows such companies to limit their expenses by avoiding costly labor laws and not paying benefits.
Until now, no court had given the gig economy business model a stamp of approval. That changed earlier this month, when a federal magistrate judge in San Francisco ruled that GrubHub – a food delivery service – had properly classified one of its delivery drivers as an independent contractor, despite the fact that the driver performed work that was part of GrubHub’s regular business.
In Lawson v. GrubHub, Inc., the plaintiff, Raef Lawson, alleged that GrubHub had misclassified him as an independent contractor in violation of California’s minimum wage, overtime, and expense reimbursement laws. Magistrate Judge Jacqueline Scott Corley held that GrubHub satisfied its burden of showing Lawson was properly classified as an independent contractor under California’s common law “Borello” test. This multi-factor test was created by the California Supreme Court in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989), and turns on “whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.”
In applying the “Borello” test, Judge Scott Corley wrote: “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.” A critical factor in the court’s decision was that Mr. Lawson decided for himself when, where and how frequently he performed door-to-door deliveries.
The Lawson decision is an encouraging legal development for companies hiring independent contractors to perform tasks that are part of their regular business. However, Lawson will not be the last word on the issue.
The California Supreme Court is currently considering the status of gig economy workers in Dynamex Operations West Inc. v. Superior Court. In deciding this case – argued just two days before the Lawson decision came down – the California Supreme Court could well replace the “Borello” test applied in Lawson with a new “gig economy” test that would make it easier for workers to show they are employees, rather than independent contractors. Given the pro-employee bent of the California courts, Lawson does not seem likely to stand as good law in our state.
Stay tuned for future e-blasts from the Hunt Ortmann Employment Law Group on new developments in the gig economy and other laws affecting California employers.
JoLynn M. Pollard is a Shareholder at Hunt Ortmann who, for 30 years, specializes in the fields of business and insurance counseling and litigation, as well as employment. Ms. Pollard leads the Firm’s growing Employment Law Group, and also spearheads Hunt Ortmann’s burgeoning Insurance Group. Lisa Lawrence-Hughes is an Associate with Hunt Ortmann and is a seasoned business and employment litigator, with over 12 years of experience defending employment lawsuits and advising California employers. For more information, please visit our website here or contact us directly at firstname.lastname@example.org.