Why it matters

In a closely watched case, a California federal court judge ruled that a Grubhub driver was correctly classified as an independent contractor. Raef Lawson claimed that he was misclassified by the company and was actually an employee entitled to additional benefits, including minimum wage and overtime. But the court sided with the company, finding that Lawson was not supervised or told when to work, what kind of transportation to use or what routes to drive when he made deliveries. Therefore, Grubhub did not control his work, the court said, although the judge noted the issue likely warrants additional review by the legislature. “Under California law whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition,” the court wrote. “With the advent of the gig economy, and the creation of a low wage workforce performing low skill but highly flexible episodic jobs, the legislature may want to address this stark dichotomy.”

Detailed discussion

Raef Lawson worked as a restaurant delivery driver for Grubhub in Southern California for four months in late 2015 and early 2016. He was added as a plaintiff to a putative wage and class hour action against the company in California state court. The case was bifurcated: The first phase involved a trial on Lawson’s individual claims and whether he was an “aggrieved employee” under the Private Attorneys General Act (PAGA). Assuming the court found in the affirmative, the second phase would resolve the PAGA claim after additional discovery.

A weeklong bench trial was held in September, 2017 before U.S. Magistrate Judge Jacqueline Scott Corley. After considering all the relevant factors, the court ruled Lawson was an independent contractor, not an employee.

“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,” the court said.

Lawson executed a Delivery Service Provider Agreement with Grubhub in August 2015 that stated he was an independent contractor. The company placed no limits on Lawson doing business with others, even competitors, set no minimum period of time for availability, and permitted the use of subcontractors to perform the delivery services. Although Lawson had to provide a description of his vehicle, there were no requirements about what it needed to be. The term of the agreement was 60 days, with automatic renewals for additional 60-day periods.

Grubhub did not require Lawson to undergo any type of mandatory training or onboarding. Although Lawson signed the agreement in August, he did not actually begin making deliveries until two months later. Lawson was paid on a per-order-delivered basis, plus tips and a nominal amount for mileage to the delivery location from the restaurant. If drivers accepted at least 75 percent of the orders offered during their scheduled block of time, Grubhub guaranteed $15 per hour. Lawson took advantage of this “true-up” option on multiple occasions.

Lawson was free to choose the particular route he took to a restaurant as well as for the delivery itself. He could make stops along the way or bring along a friend, with no amount of time specified in which he had to complete the delivery. Although Grubhub provided a shirt and hat that Lawson was supposed to wear in return for the use of the company’s insulated bags, he did not always wear the uniform, and the company did not check whether it was being worn.

The court also noted that Lawson “gamed the system” on multiple occasions. This involved accepting an offer he did not intend to deliver to maintain his acceptance rate and eligibility for the true-up minimum. Lawson would then contact the driver hotline and ask that the delivery be reassigned, which did not affect his acceptance rate.

After reviewing the evidence, Judge Corley applied the multifactor test set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, a 1989 California Supreme Court opinion. In that case, the court found the principal 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.”

Secondary factors include “(a) whether the one performing services is engaged in a distinct occupation or business; (b) 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; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.”

Beginning with the most important factor, the court said Grubhub exercised little control over the details of Lawson’s work. “Grubhub did not control how he made the deliveries—whether by car, motorcycle, scooter or bicycle,” the court wrote. “Nor did it control the condition of the mode of transportation Mr. Lawson chose. Grubhub never inspected or even saw a photograph of Mr. Lawson’s vehicle.”

Nor did the company control Lawson’s appearance, who could be with Lawson in his vehicle, or his work schedule. “Mr. Lawson’s gaming of the Grubhub driver app further illustrates how little control Grubhub had over the details of Mr. Lawson’s work,” the court said. “For 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.”

Examining the secondary factors, the court found some weighed in favor of an employment rather than an independent contractor relationship. Lawson was not engaged in a distinct occupation or business and needed no special skills to deliver for Grubhub. The method of payment weighed slightly in favor of an employment relationship, as did the fact Lawson’s work was part of Grubhub’s regular business.

Some of the factors tilted in Grubhub’s favor, however, as Lawson did not perform his work under direction or supervision, he provided his own mode of transportation and smartphone, and the engagement was short-lived. The intent of the parties was a neutral factor, the court said.

After considering all the facts and the Borello factors, “the Court finds that all the factors weighed and considered as a whole establish that Mr. Lawson was an independent contractor and not an employee,” Judge Corley wrote. “Of primary significance, Grubhub did not control the manner or means of Mr. Lawson’s work, including whether he worked at all or for how long or how often, or even whether he performed deliveries for Grubhub’s competitors at the same time he had agreed to deliver for Grubhub.”

The court did include a note of caution about the application of the traditional independent contractor/employment test in a changing workforce.

“Under California law whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition,” the court said. “If Mr. Lawson is an employee, he has rights to minimum wage, overtime, expense reimbursement and workers compensation benefits. If he is not, he gets none. With the advent of the gig economy, and the creation of a low wage workforce performing low skill but highly flexible episodic jobs, the legislature may want to address this stark dichotomy.”

To read the opinion in Lawson v. Grubhub, Inc., click here.