So-called “gig economy” employers rejoiced on February 8, 2018, when, in Lawson v. Grubhub, Inc., Case No. 15-cv-05128-JSC, U.S. District Judge Jacqueline Scott Corley held that Plaintiff Grubhub independent contractor driver, Raef Lawson, was not entitled to the benefits and protections of employee status under California’s minimum wage, overtime, and employee expense reimbursement laws. In doing so, the Court provided some helpful worker classification guidance for companies who maintain independent contractor workforces. However, the celebration may be premature for a number of reasons. First, Lawson’s dishonesty probably influenced the outcome of the case, whereas an “upstanding” plaintiff may have fared better. Second, the California Supreme Court is actively attempting to loosen the legal standards that led to this decision. Finally, since the determination of whether a worker is an employee or independent contractor is extremely fact-specific and varies throughout jurisdictions and enforcement agencies, care must be taken before relying too heavily on this decision.
In considering whether Lawson was an “employee,” the Court applied the multi-factor test from S.G. Borello & Sons, Inc. V. Department of Industrial Relations, 48 Cal.3d 341 (1989). Courts in California use the Borello factors to determine whether a plaintiff is an employee or independent contractor. Under Borello, the “principle test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Borello, 48 Cal.3d at 350. Applying the primary “control factor” from Borello, the Court concluded that the evidence weighed strongly in favor of finding that Mr. Lawson was an independent contractor.
To reach its decision, the Court determined that Grubhub did not control the following: how or when Lawson made deliveries; the vehicle he used to make deliveries; his appearance; who could ride in his vehicle; when he worked; or for how long he worked. It neither required him to undergo any trainings nor did it provide him with any orientation. Grubhub also did not evaluate his performance in any fashion. Further illustrating how Grubhub had little control over Lawson, the Court also found that Lawson had “gamed” the compensation system. Specifically, it noted that “[f]or weeks, if not months, Mr. Lawson was able to perform little to no deliveries and yet get compensated as if he had been available for entire blocks—and sometimes even past his scheduled blocks—because Grubhub was not supervising his performance.” This dishonest conduct eventually led to Grubhub’s termination of his Agreement for cause.
The Court then considered the “Borello secondary factors” which mostly cut in favor of an employment relationship. Those factors include: whether the one performing services is engaged in a distinct occupation or business; 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; the skill required in the particular occupation; whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; the length of time for which the services are to be performed; the method of payment, whether by the time or by the job; whether or not the work is a part of the regular business of the principal; and whether or not the parties believe they are creating the relationship of employer-employee.
Though the Court ultimately held that Lawson was an independent contractor under Borello, it could have ruled differently. Perhaps it would have if Lawson was a more sympathetic plaintiff. The court also called the employee/independent contractor distinction an “all-or-nothing proposition,” and invited the California legislature to address the “stark dichotomy” between employees’ and independent contractors’ benefits. Because different agencies and courts throughout the country apply different balancing tests when analyzing classification issues, it is very difficult to predict whether this decision (and its reasoning) will be followed elsewhere. Indeed, another court could look at this exact same set of facts and rule that a Grubhub delivery driver (or any independent contractor for that matter) is an employee. In short, while certainly a promising development in the area of worker classification issues, employers may want to postpone ordering their celebratory take-out.