Grubhub Owes Misclassified Former Driver $65 – with Implications

San Francisco, CAA  Grubhub delivery driver, who accused the food delivery company in 2015 of withholding minimum wage and overtime pay from drivers and that drivers are owed reimbursements for costs accrued through deliveries has been awarded $65.11 – yes, and eleven cents—for California minimal wage violation. The judge ruled that the gig driver was a Grubhub employee and not an independent contractor. That $65.11 award, however, could have implications for the gig economy.

The ABC Test

Under California law, U.S. District Court Judge Jacqueline Scott Corley ruled that former driver Raef Lawson was misclassified as a contractor and was therefore underpaid according to California’s wage law. "Mr. Lawson is properly classified as an employee, not an independent contractor, for the purpose of his minimum wage and overtime claims," Judge Corley said. Under the ABC test, which was upheld in the 2018 Dynamex ruling and passed by legislature in 2019, the court found that Lawson is indeed an employee. The 3-prong test determines whether a worker is:

1. Free from an employer's control
2. Performs work outside the line of business
3. Operates independently

Lawson’s Lawsuit

Lawson’s complaint goes back to 2015. He worked as a driver for four months and accused Grubhub of misclassifying him as an independent contractor and by doing so, depriving him of the same rights and benefits as employees.

A district court ruled in 2018 that he was an independent contractor under the Borello test, an 11-factor employee classification test stemming from the 1989 suit S.G. Borello & Sons Inc. v. Department of Industrial Relations, and used by California courts until the ABC test (above).

Lawson appealed, arguing that the ABC test should be applied. The court ruled that the test can be retroactively applied to an employee's work and that Lawson is an employee concerning his wage claims. The $65.11 was calculated as Lawson being an employee of Grubhub, yet earned below the state’s minimum hourly wage nine times in 2015 and 2016. California’s minimum wage was $9 in 2015 and rose to $10 in 2016.

Thanks to Judge Corley’s decision, Lawson is the first gig worker in the country to be declared an employee for wage law purposes by a court, according to his attorney and reported by Law360. Lawson’s attorney said that the next phase of the case will involve "assessing [Private Attorneys General Act] penalties against Grubhub for its misclassification of drivers for years throughout California." Under California's PAGA, workers may sue on behalf of themselves, the state and other workers for labor law violations.

If the decision holds, the implications could be huge: it could clear the path for former drivers to file for retroactive compensation.

The case is Raef Lawson v. Grubhub Inc., case number 3:15-cv-05128, in the U.S. District Court for the Northern District of California.

Grubhub Independent Contractors

However, Grubhub and other third-party delivery companies, including Uber and Lyft, have long argued that their drivers should be classified as independent contractors. And for now, they will continue as independent contractors.

“Thanks to Prop 22—which California voters overwhelmingly enacted and the California Court of Appeal recently upheld—drivers who use the Grubhub app will continue to enjoy the freedom and flexibility of working as independent contractors,” said Grubhub attorney Theane Evangelis in a statement. (Proposition 22 is the California law passed in 2020 that categorizes app-based workers specifically as independent contractors.)