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A Loss and a Win (Sort of) for GrubHub Drivers

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Smaller window available for retroactive application of Dynamex “ABC” test

San Francisco, CAOn September 20, the Ninth Circuit partially dismissed, partially upheld and remanded back to the District Court a GrubHub driver’s claim that he was owed back wages and other remedies under the California Labor Code and related wage orders. Raef Lawson v. Grubhub is a complicated decision, but there is some positive news for gig workers who allege that they were misclassified as independent contractors.

The bad news is that Lawson’s lawsuit cannot proceed as a class action. This is not automatically fatal, but it may be impractical for him to pursue his claim. The good news is that Proposition 22 does not necessarily prohibit the retroactive application of the Dynamex Operations West v. Superior Court of Los Angeles County “ABC” test for determining who is an independent contractor.

First, the facts


For four months, from late 2015 to early 2016, Raef Lawson worked for Grubhub, Inc. delivering food in the Los Angeles area. Grubhub classified Lawson as an independent contractor rather than as an employee. Lawson later sued Grubhub, arguing that he had been misclassified -- that he should have been treated as an employee. He alleged California Labor Code violations for failing to pay minimum wage and overtime and failing to reimburse expenses. He sought to represent a class of similarly situated delivery drivers in California, and penalties under California’s Private Attorneys General Act (PAGA).

In 2018, the District Court for the Northern District of California determined that under the rules of Borello v. Department of Industrial Relations, the standard then in effect, Lawson was an independent contractor. The District Court also denied him class action certification. Lawson appealed to the Ninth Circuit.

New developments at lightning speed


Then a lot of things began to happen very quickly. Three months after the District Court’s opinion, with Lawson’s lawsuit was still pending, the California Supreme Court adopted a new test (short-handed as the “ABC” test) for determining whether a worker was really an employee. Under the new test, it is far more likely that a worker could prevail on his or her argument about misclassification.

In September 2019, the California legislature codified the “ABC” test into law. No longer was the new standard simply a matter of court decision. It was a statute, actually somewhat broader in application than the original Dynamex decision.  Big app-based employers like Uber and Grubhub saw this as an existential challenge to their basic business model. Pushback ensued.

In November 2020, after intense lobbying, California voters passed Proposition 22, which provides that if certain conditions are met, app-based drivers” are independent contractors. Those conditions include an earnings guarantee of 120 percent of the minimum wage, a healthcare subsidy and insurance. The constitutionality of Proposition 22 has also been challenged.

Meanwhile, the Ninth Circuit stayed Lawson’s appeal, pending the California Supreme Court’s decision in Vazquez v. Jan-Pro Franchising International, Inc., which was set to consider the question of whether Dynamex should be applied retroactively. In early 2021, the California Supreme Court held that the “ABC” test should be applied retroactively to claims rooted in wage orders. The statutory codification of the Dynamex “ABC” test, however, should be applied only prospectively.

Back to Raef Lawson’s California labor lawsuit


The Ninth Circuit, like the District Court, found that Lawson’s lawsuit did not qualify for class action status. Most of the drivers in the lawsuit, unlike Lawson, had waived their right to sue and signed agreements to arbitrate disputes. With only one other driver who had refused to do so, the proposed class was simply too small to justify class action status. This may take Lawson out of the immediate picture.

As to the larger issue about retroactive application, the Ninth Circuit recognized both minimum wage and overtime claims were “rooted in wage orders,” so it directed the District Court to apply the “ABC” test to those claims. AB5 expressly provided that the “ABC” test should be applied to all California Labor Code claims after January 1, 2020. But Lawson had left Grubhub long before. Thus, the Ninth Circuit also sent back to the District Court the question of whether to apply the “ABC” test to a pre-2020 expense reimbursement claim.

Where are we now?


It appears that, except for app-based drivers who may receive the benefits described in Proposition 22, the Dynamex “ABC” test is still good law. With the same carve out, the slightly more expansive AB5 appears to be good law from September 2019 onward. The issue of misclassification is so important to app-based behemoths, however, so new challenges to Dynamex and AB 5 are a near certainty.

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