Grubhub COO Says Driver Like Not Being Employees

SAN FRANCISCO (CN) – Grubhub's chief operating officer testified Friday that the company's delivery drivers like being independent contractors, even though thousands have accused the company of mislabeling them as non-employees to skirt labor laws.

Taking the stand on the fourth day of a bench trial that could send shockwaves to rattle technology firms relying on non-employees for cheap labor, Grubhub COO Stanley Chia said drivers enjoy the flexibility and autonomy that comes with being independent contractors.

"We listen to our driver base, and that is what we have overwhelmingly heard," Chia said.

But Shannon Liss-Riordan, attorney for former Grubhub driver Raef Lawson, asked Chia if he was aware of the 7,000 drivers who have filed claims against the company saying they were mislabeled as contractors and denied employment benefits.

"I'm aware of lawsuits, but not aware of all the specifics," Chia replied.

Though this trial is focused solely on the employment beef of one former driver, it could impact how scores of other technology firms, like Uber and Lyft, use a cheaper pool of labor to turn profits. The contracted workers serve as the critical backbone for what has come to be known as "the gig economy."

While similar suits have been settled or stalled in court, this is the first known "gig economy" labor spat to make it to trial in California. The pivotal question centers on how much control Grubhub wielded over its former driver.

Grubhub argues a typical employee would never reap the benefits that Lawson enjoyed as an independent contractor working for the company.

"Being told exactly when to work, how to work, what orders they have to deliver in a very command-and-control function, there's a lot of resistance to that," Chia said in court on Friday.

But Lawson's lawyers say the company controlled drivers through the use of what Grubhub calls incentives. Grubhub refused to guarantee an hourly rate of $11 to $15 for drivers unless they accepted 75 to 85 percent of assigned orders. Drivers also had to get stellar reviews from restaurants and customers to get a shot at choosing their shifts in advance before the most desirable and profitable time blocks were gobbled up by other drivers, according to Lawson's testimony.

Chia said incentives like the minimum hourly rate, or "true-up rate," were intended to ensure drivers were fairly compensated even if fewer delivery orders than expected came through during a driver's shift.

"If they get zero offers, they get the true-up rate," Chia said. "If we truthfully generated no orders, we wanted to make sure we made it good for their time."

Chia said every driver starts with a 100 percent acceptance rate, ensuring they will get the guaranteed minimum. Lawson had testified it was nearly impossible to accept each assigned order within 20 seconds, especially if a driver was out of cell service range or taking a bathroom break.

Another issue that surfaced Friday is how crucial food delivery is to Grubhub's overall business. Chia said Grubhub is primarily a marketing and online ordering platform, and that food delivery is a small component of its business.

That issue is crucial because whether or not a worker is supporting a company's core or principal business is one of one of 11 sub-factors the California Supreme Court established to determine one's employment status in the 1989 ruling S.G. Borello & Sons Inc. v. Dept. of Industrial Relations.

Chia said 95 percent of the restaurants Grubhub works with in 70 major urban markets operate their own in-house delivery service.

"It's a very small portion [of our business]," Chia said of food delivery. "It's probably slightly larger in California, but still a small portion of our business overall."

During cross-examination, Chia acknowledged that most food orders Grubhub processes are for delivery, but he said a majority of those deliveries are handled by restaurants, not Grubhub.

Challenging Grubhub's portrayal of food delivery as a small part of its business, Liss-Riordan listed off the many food-delivery firms Grubhub has acquired in recent years, including Foodler, LAbite, and Delivered Dish. Chia replied that Foodler was primarily a marketing firm, much like Grubhub, with a smaller delivery component.

"I don't know that I'd say we're doing any of this to grow our delivery service," Chia said.

With that, U.S. Magistrate Judge Jacqueline Scott Corley chimed in with her own question. She asked how the company would grow in urban markets where demand for delivery is rising, as more city dwellers forego car ownership and rely on services like Uber and Lyft for transportation.

"You agree that in order for Grubhub to stay viable, that it's a challenge in an urban environment for people to get to a restaurant to pick [food] up," Corley asked.

"Yes. I think that's probably right," Chia acknowledged.

Lawson claims Grubhub failed to pay him minimum wage, overtime wages or fully reimburse him for job-related car and phone expenses. The former driver also wants to slap Grubhub with fines for violating state labor laws under California's Private Attorneys General Act.

The bench trial is expected to continue through Sept. 18.

Follow @NicholasIovino

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