GrubHub Wins Misclassification Case, But the Issue Ain’t Over


It was a familiar tale in the gig economy. A worker is classified as an independent contractor, but believes the company he works for exerts enough control that he should be treated as an employee, deserving of all the benefits that go along with that work classification.

The twist was that the case of Lawson v. Grubhub was the first such misclassification suit to make it to trial. By all media accounts, it looked like the case might end up as a win for workers in the gig economy.

Rael Lawson was a former food delivery driver for GrubHub for four months. He alleged that the company misclassified him as a 1099 independent contractor when he should have been a W-2 employee. At the end of closing arguments on 30, the federal judge adjudicating the case, U.S. Magistrate Judge Jacqueline Corley, “gave hints she’s prepared to rule that a GrubJub driver should be treated like an employee,” according to The Recorder, an online source of legal news and analysis. Such a ruling could have significant implications for the gig economy. In particular, it was reported that the judge was not impressed by GrubHub’s argument that delivery services was not a core part of its internet restaurant marketing business.

However, those observations by the media turned out to be a head fake. In the end, Judge Corley ruled that Lawson was not an employee because GrubHub did not control his delivery work. Her ruling was based on the precedent established by the multi-factor test set forth in the California state case, S.G. Borello & Sons, Inc. v. Department of Industrial Relations. That case said that the principle test of an employment relationship is whether the employer has the right to control the manner and means of the worker’s activities to accomplish his/her work. The judge said that GrubHub’s level of control of Lawson’s work was the most important consideration, and the relationship Lawson had with GrubHub supported that he was an independent contractor, not an employee.

We’ve watched as numerous Uber lawsuits have surfaced, where lines are blurred as to how workers are classified when they are part of an on demand mobile app. However, at least in the U.S., all of these legal actions have been settled out of court. And now, the companies that are the most engaged in the gig economy have a U.S. court ruling in their favor over an employee misclassification issue.

However, the final chapter on this issue has not been written.

The California Supreme Court, which is the ultimate arbiter on this state law issue, may soon be ruling on a case that could change how state law views the classification of independent contractors, lessening the burden of proof for workers to prove they are employees.

And in summarizing her court order, Judge Corley noted: “Under California law whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition. 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.”

GrubHub Wins Misclassification Case, But the Issue Ain’t Over
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GrubHub Wins Misclassification Case, But the Issue Ain’t Over
Federal court in California found that GrubHub did not misclassify one of its drivers
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First Capitol Consulting.Inc
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