Gig-Economy Landmark: Grubhub Drivers Deemed Contractors

by: The Knowledge Group

February 20, 2018


A U.S. federal judge sitting in San Francisco has ruled GrubHub’s delivery drivers are not employees.

In Lawson v. GrubHub Inc., a former driver, Raef Lawson, claimed Chicago-based Grubhub violated labor law by not reimbursing driving expenses, failing to meet the minimum wage, and avoiding overtime rules.

But Judge Jacqueline Scott Corley cited California law, which creates a dichotomy between an employee and an independent contractor. The gig workforce was not anticipated in the law; the judge suggested that the state legislature could change this.

Meanwhile, this is the first time a federal court has spoken on whether gig economy workers are employees or not.

W-2 v. 1099

In California and elsewhere, the key test of a W-2 employer-employee relationship is whether the company has “the right to control the manner and means” of getting a job done.

Grubhub argues it should be deemed not a fast food delivery service, but is, rather, a software development company. The argument is a bid to position delivery drivers outside of the core business functions for the purposes of labor law. UberLyft, and other app-based competitors in the delivery sphere enjoy a parallel flexibility in their relationship to their drivers.

Raef Lawson plans to appeal.

Lawson’s attorney points out that GrubHub’s control over drivers is real, and evident. Grubhub sets forth expectations for its drivers to work in set areas. The drivers must show up to take assignments in the time periods they sign up for. Thus, the driver’s position is that classifying delivery workers as 1099 contractors means employers wrongly avoid taxes, benefits packages, and workers’ comp as well.

The Broader Ramifications

Judge Corley’s decision calls out to lawmakers in California, and in every state, to examine state laws and regulations.

In the next few years, expect legislators to start coming to terms with the gig economy. And expect states to establish policy that suits today’s tech-oriented workforce.