Judge rules Grubhub properly classified delivery driver as independent contractor

Megan Rose Dickey

A few months after hearing closing arguments in the Lawson v. Grubhub case, Judge Jacqueline Scott Corley has ruled Raef Lawson, the plaintiff, was indeed an independent contractor while driving and delivering food for Grubhub.

“We’re extremely satisfied with today’s ruling in Lawson v. Grubhub, which validates the freedom our delivery partners enjoy from deciding when, where and how frequently to perform deliveries," Grubhub CEO Matt Maloney said in a statement. We will continue to ensure that delivery partners can take advantage of the flexibility that they value from working with Grubhub."

A key element of the case centered around the Borello test, which looks at circumstances like whether the work performed is part of the company’s regular business, the skill required, payment method and whether the work is done under supervision of a manager. The purpose of the test is to determine whether a worker is a 1099 contractor or a W-2 employee.

Here's a key nugget from Judge Corley's opinion, filed earlier today:

After considering all of the Borello factors as a whole in light of the trial record, the Court finds that Grubhub has satisfied its burden of showing that Mr. Lawson was properly classified as an independent contractor. While some factors weigh in favor of an employment relationship, Grubhub’s lack of all necessary control over Mr. Lawson’s work, including how he performed deliveries and even whether or for how long, along with other factors persuade the Court that the contractor classification was appropriate for Mr. Lawson during his brief tenure with Grubhub.

In the trial's closing arguments back in October, Judge Corley noted that there was a lot of evidence, a lot of law and "it's a unique situation." She also mentioned that she doubts her decision "will be the last word."

In her conclusion today, Judge Corley says California may want to "address this stark dichotomy" -- that is, the rise of the gig economy and the "creation of a low wage workforce performing low skill but highly flexible episodic jobs."

Those who work as 1099 contractors can set their own schedules, and decide when, where and how much they want to work. For employers, bringing on 1099 contractors means they can avoid paying taxes, overtime pay, benefits and workers’ compensation.

Some companies, recognizing that some people don’t want to be independent contractors, have already made the switch from 1099 to W-2. Those who work for Munchery and Instacart, for example, are classified as W-2 workers. Though, Instacart only classifies its full-service workers (those who shop and do deliveries) as W-2 in certain markets, while it still employs those who just do deliveries as 1099 contractors.

In 2015, a Recode analysis estimated it would cost Uber $209 million to reclassify 45,000 drivers in California. As companies like Uber, Lyft and Postmates are still trying to reach profitability, the costs of reclassifying their workers could have a negative impact on their respective bottom lines.

I've reached out to Shannon Liss-Riordan, Lawson's lawyer, and will update this story if I hear back.

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