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Should Grubhub drivers be classified as employees?

The trial between the restaurant app and a former delivery driver wraps up. The implications for the gig economy could be far-reaching.

grubhub-for-restaurants-delivery-status

Food delivery startup Grubhub may have to rethink the way it classifies its workers.

Grubhub

Raef Lawson spent four months delivering food for the on-demand restaurant app Grubhub in Los Angeles in 2015. Now he's suing the company. He believes he should have been classified as an employee, rather than independent contractor. He says he received sub-par wages because of that classification.

Grubhub says, however, that Lawson could choose when and how much he wanted to work, so there's no question he was an independent contractor.

Lawyers for the two sides made closing arguments over the issue to a packed courtroom in California's US District Court for the Northern District on Monday. It was the conclusion of a two-week trial and now it's up to US Magistrate Judge Jacqueline Scott Corley to decide whether Lawson should've been classified as an employee. Her decision will affect not only Grubhub's business model, but it could also have sweeping consequences across the on-demand economy.

"This is the first case to reach decision in the so-called gig economy," said Shannon Liss-Riordan, who is representing Lawson.

The employee versus independent contractor debate has raged over the past few years as on-demand services have boomed. Ride-hailing companies Uber and Lyft have based their business models on contract labor, as have other on-demand services, such as TaskRabbit and Postmates. The people who work driving cars or doing deliveries for these companies are considered "gig workers" -- or contract employees.

Similar lawsuits have been brought against other on-demand companies, including Uber, Lyft, Postmates, Handy, Shyp, DoorDash and Washio.

To prove someone should be legally classified as an employee, several factors are necessary. They all hinge on what type of control the company has over the person. For example, does the company make the schedule? Does it train people? Are workers asked to wear uniforms?

"Let's look at the biggest issue here, which is the right to control when you work," Judge Corley said on Monday.

Grubhub says the independent contractor classification means a worker can be their own boss and set their own schedule. But it also means it isn't responsible for costs, including Social Security, health insurance, paid sick days and overtime. Grubhub workers are expected to supply their own smartphone and transportation, along with paying for gas, repairs, phone data and other related expenses.

"He was a gig economy operator, that was his business," said Grubhub lawyer Michele Maryott. "He didn't want to work, no problem. He didn't have to."

Workers for Grubhub sign up to work certain time shifts. They can work whatever shifts they like, but once they confirm a shift they're supposed to do deliveries.

"We want you to be available when you say you're going to be available," Maryott said. "We can't force you."

Lawson says that when he signed up for shifts for Grubhub, he earned less than minimum wage after he doled out costs for expenses, like gas, parking and phone data. Grubhub says Lawson could've made more money and the reason why he didn't was because he wasn't accepting all of the delivery offers the company sent his way.

This case is about more than just wage law and making it fair for drivers, said Liss-Riordan. It's about ensuring on-demand companies like Grubhub "don't have a race to the bottom where no one is going to follow the rules."

Judge Corley denied Liss-Riordan's request for class-action status in the Grubhub lawsuit, which means the final judgement will pertain only to Lawson. But, given the type of claim the case is filed under, the judge could impose penalties against Grubhub for allegedly underpaying drivers across California.

After nearly six hours of arguments on Monday, Judge Corley said she had a lot of evidence to sift through to make her decision. She's expected to rule within the next few weeks.

"It's a unique situation… There's a lot of factors either way," she said. "And I doubt I'll have the last word."

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