Hunton Employment & Labor Perspectives

In a highly anticipated opinion, a Federal Judge in California ruled in favor of GrubHub, an internet food ordering service, finding it properly classified a delivery driver as an independent contractor.

In Lawson v. GrubHub, the plaintiff, a delivery driver, alleged that GrubHub violated California’s minimum wage, overtime and employee expense reimbursement laws by misclassifying him as an independent contractor when he was really an employee.  He brought the case on behalf of himself and as a representative action pursuant to the California Private Attorney General Act (PAGA).

While many other gig economy companies like Uber, Lyft and Postmates have faced similar lawsuits by drivers, they have often settled before trial.  Thus, companies that rely on independent contractors, especially on-demand sharing economy companies,  were especially interested in the outcome of this bench trial.

In her ruling, the Northern District of California judge considered the facts of the case under the “Borello” test for worker classification, which is derived from a California Supreme Court ruling in 1989 in the matter of S.G. Borello & Sons, Inc. v. Dept. of Indus. Relations.  The test is comprised of one primary factor, the company’s right to control the work, as well as eight secondary factors, and it is used to determine whether the relationship between a worker and a business is in reality that of an employer-employee or an independent contractor.

In the February 8, 2018 opinion, the Judge stated that while some factors weigh in favor of an employment relationship, GrubHub’s lack of necessary control over Mr. Lawson’s work, including how he performed deliveries, along with other factors persuaded the Court that the contractor classification was appropriate for Mr. Lawson.

Specifically the judge noted the following facts pertaining to the right to control factor weighed strongly in favor of finding that Mr. Lawson was an independent contractor:

• GrubHub did not control whether and when Mr. Lawson would work and for how long;
• GrubHub did not control the amount of time in which a driver had to pick up an order or how quickly he had to complete the order;
• Lawson could make deliveries for other companies while delivering for GrubHub;
• GrubHub did not control the vehicle Mr. Lawson used for deliveries or its condition;
• GrubHub did not require Mr. Lawson to engage in any training or orientation;
• GrubHub did not control Mr. Lawson’s appearance while making deliveries; and
• GrubHub did not have control over who would make deliveries for Mr. Lawson or accompany him in his vehicle.

The impact of this ruling, however, remains to be seen, not only because of how fact specific the determination on worker classification is, but also because the California Supreme Court may currently be reconsidering whether the Borello test should stand.  The California Supreme Court in Dynamex Operations v. Superior Court recently asked parties to brief the Court and listened to oral arguments on whether California law on classifying workers as employees or independent contracts should keep Borello or adopt a different test.

We will track any appeal of the GrubHub decision, as well as the Supreme Court’s ruling in Dynamex and provide updates accordingly.