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Gig economy worker is not an employee; judge rules Grubhub driver is independent contractor

February 09, 2018

A federal judge yesterday in San Francisco ruled a driver for Grubhub Inc. (NYSE: GRUB) — a human cloud, restaurant delivery platform — was classified correctly as an independent contractor, rather than an employee. US Magistrate Judge Jacqueline Scott Corley handed down the decision in the US District Court, Northern District of California.

It’s a decision that could have implications for other parts of the gig economy that use independent contractors. It’s the first federal court to reach a verdict on whether workers in the gig economy are employees, Seattle University Associate Law Professor Charlotte Garden told The Seattle Times.

The lawsuit centered around whether former Grubhub driver, Raef Lawson, was misclassified as an independent contractor while delivering food for Grubhub.

Lawson worked as a restaurant delivery driver for Grubhub in Southern California for four months in late 2015 and 2016. He asserted that Grubhub improperly classified him as an independent contractor, and therefore violated California’s minimum wage, overtime and employee expense reimbursement laws.

In her opinion, Judge Jacqueline Scott Corley wrote the “critical question” was whether Lawson was an employee or an independent contractor under California’s common law “Borello” test, and that Grubhub satisfied its burden of showing Lawson was properly classified as an independent contractor.

“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 judge wrote.

The judge also alluded to the need for more legislation on the gig economy.

“Under California law, whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition,” she 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.”

Lawson’s attorney, Shannon Liss-Riordan, said they plan to appeal the decision.

“Among other issues, the California Supreme Court is considering adopting a more protective test for employee status, so I was surprised the decision was issued before the Supreme Court has issued that decision,” Lawson’s attorney, Liss-Riordan, said in a statement provided to SIA. “Either way, I believe we should have prevailed even under the Borello standard, so we will appeal the decision.”

Grubhub lands contract; revenue up 49%

In more news for Grubhub, the company yesterday announced a new partnership with Yum! Brands to drive incremental sales to KFC and Taco Bell restaurants in the US through online ordering for pickup and delivery. Yum brands’ businesses include KFC, Pizza Hut and Taco Bell. YUM also agreed to purchase $200 million of Grubhub’s common stock. As a part of the partnership, Grubhub will appoint Pizza Hut US President Artie Starrs to the newly created board seat as an independent director.

Separately, Grubhub reported yesterday that revenue rose 49% year over year to $205.1 million in the fourth quarter. Net Income rose to $53.5 million from $13.6 million.


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