Grubhub Driver Appeals to Ninth Circuit Over Worker Classification Law

In this April 4, 2014 file photo, a sign for GrubHub is displayed on the door to a New York restaurant. (AP Photo/Mark Lennihan)

(CN) — A former Grubhub driver made a last-ditch entreaty to the Ninth Circuit on Wednesday hoping that a landmark change to California’s worker classification law will be enough to reverse his loss in federal court years ago.

Raef Lawson sued Grubhub in 2015 for misclassifying him as an independent contractor during the four months he spent delivering food in 2015 and 2016, making him ineligible for overtime pay and expense reimbursement.

Lawson brought his action under California’s Private Attorneys General Act, a law that allows private citizens to act in the place of the state attorney general to recover penalties for labor violations.

His was the first-ever gig worker misclassification lawsuit to make it to trial in California, though U.S. Magistrate Judge Jacqueline Scott Corley ruled in favor of Grubhub in 2018.

A panel of three Ninth Circuit judges finally heard Lawson’s appeal on Wednesday.

They will decide whether to retroactively apply a new standard established by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, a case decided just months after Corley’s ruling.

The Dynamex test requires an employer to prove that a worker is a contractor, not an employee, by showing that A) the hiring entity does not directly control the worker, B) the work falls outside the hiring entity’s usual course of business, and C) the worker is customarily engaged in an independently established trade occupation, or business related to the work they are doing.

The new test replaces a complex 11-factor test under S.G. Borello & Sons Inc. v. Dept. of Industrial Relations from 1989, which Corley used to determine Lawson’s employment status based on how much control Grubhub had over him.

Under Borello, she found Lawson did not report to a supervisor, that he used his own vehicle and phone for work and that he worked far less than full time. Though some factors worked in his favor — for example Grubhub controls pay rates, when work shifts were made available and the geographic boundaries of delivery zones — Lawson ultimately had more control than Grubhub, especially given evidence that he “gamed” the system by toggling off the app or delaying deliveries to get paid more money for fewer deliveries.

But just this year, the state Supreme Court held that the Dynamex “ABC” standard, codified into California law with the passage of Assembly Bill 5 in 2019, should apply retroactively.

Lawson’s attorney Shannon Liss-Riordan told Wednesday’s panel that Corley’s ruling should be overturned since he was clearly a Grubhub employee under the ABC test, and that the case should be sent back to Corley to determine final damages and penalties.

“I think there should be no doubt that the district court must be reversed on its holding that Mr. Lawson was an independent contractor. It’s now clear that the ABC test should have applied to his claims. The California Supreme Court has held that the adoption of that test in the Dynamex decision is retroactive,” she said.

In fact, Liss-Riordan already asked Corley to reverse herself after the Dynamex ruling came down, a decision the judge said she preferred to leave up to the appellate court.

But the recently-passed Proposition 22 exempts app-based employers like Grubhub, Uber, Lyft, and DoorDash from having to comply with the ABC test under AB 5, prompting Circuit Judge William Fletcher to ask why the new law doesn’t abate Lawson’s claims.

Liss-Riordan countered that it only prospectively exempts some companies from AB 5 if they meet certain requirements. She says it makes no sense for Prop. 22’s exemptions — which only apply going forward — to cover Grubhub’s conduct from years ago.

“How could it possibly be that Grubhub’s’s liability for violations back in 2015 and 2016 has anything to do with whether after AB 5 was enacted in 2020? It met various exemptions the Legislature just wrote into the law in 2019. It just makes no sense how we can be arguing about the company’s liability way back then based upon new exceptions written into the law later.”

Liss-Riordan also argued that the ABC test applies to Lawson’s reimbursement claim for phone and car-related expenses because under Dynamex, California’s wage orders requires employers to reimburse workers for tools and equipment.

But Grubhub wants wants the court to uphold the old Borello standard as the right test for assessing Lawson’s employment status.

“The court should affirm the judgment because plaintiff was properly classified as an independent contractor during the brief four months in late 2015 and early 2016 when he used the Grubhub app to find delivery leads wherever and whenever he wanted,” Grubhub attorney Theane Evangelis told the panel. “At the time he used the app, Borello was the test that applied.”

But even if the panel rejects Borello, Prop. 22 abates Lawson’s claims. “Today it’s undisputed that the classification of app-based drivers is determined under Prop 22,” she said.

“Proposition 22 is presumptively only prospective,” Circuit Judge Daniel Collins said, adding that if so, it would seem that Dynamex would be the relevant law.

“But under the established doctrine of abatement . . .” Evangelis started to respond.

“Here we go,” Fletcher interjected, “We finally get back to abatement.”

The law changed with Prop. 22, she said, relieving Grubhub of liability for past acts.

Fletcher said he had “trouble getting where [Grubhub] wants to get with abatement” since Lawson likely had vested rights under the law before it was changed. “Why doesn’t he have a vested contractual right? He did the work. We’re told in Dynamex that it’s retroactive, and under the retroactive analysis, I think we’re done.”

Evangelis said Lawson doesn’t have any vested rights here, because he did not obtain a final judgment.

“Not only did he not obtain a judgment here, but he lost in the district court,” she said. “Proposition 22 has eliminated those claims.”

But Fletcher said Proposition 22 only partially amended AB 5, and “doesn’t flatly eliminate what went before.”

Collins interjected to pose a hypothetical: “Suppose the statute says the minimum wage is $15 an hour and someone works for two years and get paid $12 an hour and brings a lawsuit to try to collect the difference and a proposition passes lowing the minimum wage to $13, is that an abatement?”

Evangelis dodged, saying even if Grubhub loses on the Prop. 22 issue, it should have the opportunity to “present it fully to the district court.”

The Borello test should nevertheless stand, she argued, for due process reasons. “If the ABC test applied we should have an opportunity to present a different case.”

Liss-Riordan urged the panel not to give Grubhub that opportunity.

“The facts were already found by the district court and making us go through another trial would just give Grubhub another bite at the apple.”

The judges took the arguments under submission.

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