Grubhub lawsuit ruling: Drivers are contractors, not employees

Crain's Chicago Business reports:

In a significant court decision on the status of so-called gig-economy workers, a federal judge ruled drivers for GrubHub Inc. are independent contractors and not employees.

The ruling may have far-reaching implications for other sharing economy companies, including Uber Technologies Inc., whose business models are built on pairing customers with products and services through apps and typically avoid the costs of traditional employment.

U.S. Magistrate Judge Jacqueline Scott Corley in San Francisco concluded Thursday, in a first-of-its-kind ruling, that a gig-economy driver doesn't qualify for the protections of employees under California law.


“Under California law whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition,” she wrote. “With the advent of the gig economy, and the creation of a low wage workforce performing low skill but highly flexible episodic jobs, the legislature may want to address this stark dichotomy.”


The case against GrubHub was brought by Raef Lawson, who worked as a food-delivery driver for less than six months while pursuing a career as an actor and writer. Lawson claimed the company violated California labor laws by not reimbursing his expenses, paying him less than minimum wage and failing to pay overtime.

Charlotte Garden, an associate law professor at Seattle University, said Corley's decision is a “doubly big” win for GrubHub due to California's relatively high standard for establishing workers as independent contractors.

“If they can make it here, they can more likely make it anywhere,” Garden said. “It is also the first federal court to reach a verdict on whether workers in the gig economy are employees or not, so companies like Uber and Lyft will also be celebrating this win.”

The free market in labor...