Lawson v. Grubhub, Inc.
302 F. Supp. 3d 1071 (2018)
Rule of Law:
Under California's common law Borello test, whether a worker is an employee or an independent contractor primarily hinges on the hirer's right to control the manner and means of accomplishing the desired result, weighed against several secondary factors, with no single factor being determinative.
Facts:
- Grubhub is an internet food ordering service that connects diners to local restaurants and began offering its own food delivery services in select markets in 2014, including Los Angeles.
- Raef Lawson, an aspiring actor, signed a Delivery Service Provider Agreement with Grubhub in August 2015 to make food deliveries in Southern California.
- Lawson worked as a Grubhub delivery driver from October 25, 2015, through February 14, 2016, choosing his own blocks (shifts) through an online program and having complete discretion over when and for how long he made himself available.
- Lawson provided his own vehicle, smartphone, and could provide his own insulated food bags, and was not required to wear a Grubhub uniform or display signage on his car.
- Lawson often accessed and made deliveries for Grubhub's competitors (Postmates and Caviar) during his scheduled Grubhub blocks.
- Lawson manipulated the Grubhub driver app by, for example, toggling himself unavailable for much of a block or making his phone 'out of network,' to receive minimum hourly guarantees for entire blocks even when he performed few or no deliveries.
- Grubhub terminated its Agreement with Lawson on February 15, 2016, citing his material breach for not being available to receive orders and not performing delivery services during a high proportion of his signed-up blocks.
Procedural Posture:
- San Francisco Grubhub driver Andrew Tan filed a putative wage and hour class action in a California state court.
- Grubhub removed the action to the United States District Court for the Northern District of California pursuant to the Class Action Fairness Act.
- Tan filed a First Amended Complaint adding Raef Lawson as a plaintiff and proposed class representative, and as a co-plaintiff on the California Private Attorney General Act (PAGA) claim, with Tan only remaining on the PAGA claim.
- Following a ruling on Grubhub's motion to dismiss, Plaintiffs filed a Second Amended Complaint with the same claims.
- Grubhub moved to deny class action status, arguing its delivery services provider contract contained an arbitration agreement with a class action waiver.
- The District Court granted Grubhub's motion to deny class action status, holding that Lawson was not a typical or adequate class representative for drivers who had not opted out of the arbitration agreement.
- The parties agreed that the lawsuit would be prosecuted solely by Mr. Lawson on behalf of himself and as a PAGA representative.
- The parties subsequently stipulated to a bench trial and to bifurcating the case into two phases: (1) phase one limited to Mr. Lawson's individual claims and whether he is an "aggrieved employee" under PAGA, and (2) assuming the Court finds he is an aggrieved employee, phase two would resolve the PAGA claim following additional discovery.
- The District Court held a bench trial in September 2017 and heard closing arguments on October 30, 2017.
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Issue:
Does Grubhub's relationship with Raef Lawson, a delivery driver, constitute an employer-employee relationship or an independent contractor relationship under California's common law Borello test, thereby entitling Lawson to California's minimum wage, overtime, and expense reimbursement laws?
Opinions:
Majority - Jacqueline Scott Corley
No, Raef Lawson was an independent contractor, not an employee, under California's common law Borello test because Grubhub did not have the necessary control over the manner and means of his work. The court applied the Borello test, emphasizing the 'right to control the manner and means of accomplishing the result desired' as the foremost consideration. It found that Grubhub exercised little control over how Lawson made deliveries, his appearance, his training, or even whether and when he worked. Lawson chose his own schedule, could reject orders, and even worked for competitors during Grubhub blocks. While some secondary factors favored an employment relationship (e.g., low-skilled work, integral to Grubhub's regular business in Los Angeles, and a payment method that leaned towards hourly), the court emphasized Grubhub's overarching lack of control over key aspects like schedule, delivery methods, routes, and the minimal investment required from Lawson. Grubhub's ability to terminate the agreement for a material breach (like Lawson's fraudulent gaming of the app) was considered control over the result rather than the manner and means of the work. The court also found Lawson's testimony regarding his manipulation of the app to be incredible, further supporting Grubhub's position that it lacked actual day-to-day control over his performance.
Analysis:
This case is significant for the 'gig economy' as it illustrates how federal courts applying California law evaluate worker classification under established 'right to control' tests like Borello in the context of app-based services. It reinforces that a worker's substantial autonomy over their schedule, work methods, and ability to work for competitors strongly supports independent contractor status, even if some elements align with employment. The decision highlights the importance of actual control (or lack thereof) over the manner and means of work, rather than just the result, and suggests that companies maintaining high worker flexibility may successfully argue for independent contractor classification. Future cases will continue to scrutinize the nuances of control exerted by platform companies' algorithms and policies.
