First Gig Economy Trial Decision: Independent Contractor

by Rumberger Kirk & Caldwell
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The Lawson v. Grubhub, Inc., trial has been closely monitored by those in the gig economy, since it is the first trial to address the classification of “gig” workers. At issue: whether a delivery driver for Grubhub was an employee entitled to California’s minimum wage, overtime, and employee expense reimbursement laws, or an independent contractor not entitled to any of those things. The trial itself took place before Magistrate Judge Jacqueline Scott Corley in September 2017, closing arguments were held on October 30, 2017, and Judge Corley’s 33-page ruling came down on February 8, 2018.

Bottom line: Judge Corley ruled in favor of Grubhub and found that Lawson was an independent contractor and not an employee during the four months he made deliveries for Grubhub.

Factual Background

Raef Lawson was an aspiring actor, writer, producer, and director who lived in the Los Angeles area. In late August 2015, he entered into a contract with Grubhub to be a delivery driver. Pursuant to his contract, he made food deliveries for Grubhub in the Los Angeles area from October 25, 2015, through February 14, 2016. On February 15, 2016, Grubhub terminated its agreement with Lawson, stating that Lawson had not “been available to receive orders” and had not “performed delivery services during a high proportion of the delivery blocks that [he had] signed up for.” Some other facts included:

  • Lawson chose the blocks of time in which he wanted to work by moving the toggle button on the Grubhub driver app to “available” and could either accept or reject a delivery;  
  • No one at Grubhub assigned Lawson blocks or instructed him to sign up for blocks; 
  • Grubhub did not require Lawson to attend any mandatory training or onboarding;
  • Grubhub provided Lawson with training videos, but did not monitor whether he watched the videos;
  • Lawson also worked as a delivery driver for Postmates and Caviar, two of Grubhub’s food delivery competitors, during the same period he worked for Grubhub; and
  • Lawson learned to “game” the Grubhub driver app by signing in late (sometimes hours late), accepting offers for deliveries and then asking that they be reassigned to someone else, putting his phone on airplane mode or otherwise making his cell phone “out of network,” and reporting that he had completed a delivery after the end of his scheduled block (thus ensuring that he would be paid for extra time). 

Judge Corley’s Analysis

In coming to her decision that Lawson was an independent contractor and not an employee of Grubhub, Judge Corley considered the factors set out in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989).

The most important Borello factor is the level of control by an employer over the manner and means of accomplishing the work to be performed by the employee/independent contractor.  Judge Corley found that Grubhub exerted little control over the details of Lawson’s work. For example, she determined that there was no control over whether or when Lawson made deliveries for Grubhub and for how long; the type or condition of Lawson’s vehicle that he used to make deliveries; what he wore while making deliveries; or what supplies he used for making deliveries, other than his smartphone and equipment sufficient to insulate food orders. 

Judge Corley also considered several secondary factors set forth in the Borello test, as follows:

1.      whether the one performing services is engaged in a distinct occupation or business; 

2.      the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; 

3.      the skill required in the particular occupation;

4.      whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;

5.      the length of time for which the services are to be performed;

6.      the method of payment, whether by the time or by the job; 

7.      whether or not the work is a part of the regular business of the principal; and

8.      whether or not the parties believe they are creating the relationship of employer-employee.

Judge Corley found that factors 1, 3, 6, and 7 weighed in favor of an employment relationship, factors 2, 4, and 5 weighed in favor of an independent contractor finding, and factor 8 was neutral. 

After weighing all of the factors, Judge Corley concluded that “[w]hile 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.” 

Impact of This Ruling

Judge Corley’s decision provides a detailed roadmap for the internet food ordering industry, and is to date the most comprehensive analysis by a judge of worker classifications in the gig economy. The decision will be dissected and analyzed by all those in the gig economy who classify workers as independent contractors or hope to do so.

The ruling will likely have a particularly strong impact in California, where the lawsuit was based. The lawsuit asserted violations of California law, and the Borello decision relied upon by Judge Corley was a California decision. Grubhub can feel confident, at least for now, in its designation of drivers as independent contractors in California. Other gig economy businesses in California should feel encouraged if they classify their workforce as independent contractors, but should keep in mind that Judge Corley’s decision was based on the specific  facts presented at trial. If different facts were presented, she could come to a different conclusion.  For example, if a gig economy business exerts more control over a worker by requiring particular shifts to be worked, or that the work be conducted in a certain manner,   a different result is possible.

Outside of California, the impact of this decision will be more limited. Other courts are not required to follow California decisions, although they may be persuaded by Judge Corley’s analysis. Also, because the Lawson decision is fact intensive, different facts may result in different outcomes. 

Finally, this decision may be undercut very soon if the California Supreme Court decides to do away with the Borello test and adopt, instead, the ABC test which is not favorable to gig economy businesses. This is a very real possibility, as the California Supreme Court heard oral arguments on that very issue February 6, 2018.

In other words, while the Lawson decision is certainly impactful, the issue of worker classification in the gig economy is far from settled.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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