SAN FRANCISCO (CN) — The Ninth Circuit on Monday revived a former delivery driver’s lawsuit against Grubhub, finding a voter-backed law that exempts certain California gig workers from the state’s labor code does not apply retroactively.
In November 2020, 58.6% of California voters approved Proposition 22, a ballot measure funded by Uber, Lyft and other gig companies that exempts app-based ride-hail and delivery drivers from a state law requiring those workers be treated as employees and given full employment benefits.
“We conclude without difficulty that Proposition 22 does not apply retroactively,” U.S. Circuit Judge William Fletcher, a Bill Clinton appointee, wrote for the unanimous three-judge panel. “California has a settled presumption against interpreting statutes — including ballot propositions — as having retroactive application.”
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. The classification made him ineligible for overtime pay and expense reimbursement.
Lawson brought his action under California’s Private Attorneys General Act (PAGA), 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 suit to make it to trial in California, though U.S. Magistrate Judge Jacqueline Scott Corley ruled in favor of Grubhub in 2018.
A few months after Corley issued that judgment, the California Supreme Court established a new test for determining one’s employment status in its April 2018 ruling, Dynamex v. Superior Court. The three-part “ABC test” replaced a complex 11-factor test under S.G. Borello & Sons Inc. v. Dept. of Industrial Relations from 1989, which Corley applied when she determined Lawson was not an employee.
To prove a worker is an independent contractor under the ABC test established in Dynamex, employers must show they do not directly control the worker, that the work performed falls outside the company’s usual course of business, and that the worker is “customarily engaged in an independently established trade.”
In January 2021, the California Supreme Court ruled that the ABC test established in Dynamex applies retroactively, opening the door for the Ninth Circuit to overturn the prior ruling in favor of Grubhub.
During oral arguments in June, a Grubhub attorney argued the ABC test should not apply in this case because Lawson failed to obtain a favorable judgment on his claims before Proposition 22 took effect.
Applying yet another multifactor test to determine if a claim is abated under California law, the Ninth Circuit panel concluded that Proposition 22 did not void Lawson’s claims against the food-delivery giant.
“Proposition 22 did not wholly abolish causes of action under the ABC test. Rather, it crafted a conditional and prospective exemption from the test for some workers,” Fletcher wrote for the panel in a 21-page ruling.
Lawson had asked the Ninth Circuit to not only reverse the prior decision but to also issue judgment in his favor without sending the case back to district court. He pointed out that the lower court already found his work was not outside Grubhub’s usual course of business, which means he could not be classified as an independent contractor under the ABC test.
But the panel opted to send the case back to the lower court, where Judge Corley will have to determine if the ABC test applies not only to Lawson’s claims for minimum wage and overtime pay but also to his expense reimbursement claim.
Separately, the Ninth Circuit upheld Judge Corley’s 2016 decision to deny class certification in the case, finding Lawson could not represent other Grubhub drivers because he, unlike them, did not sign an arbitration agreement that prohibits taking part in labor class actions against the company.
Reached by email, Lawson’s attorney Shannon Liss-Riordan of Lichten & Liss-Riordan said she and her client are pleased with the Ninth Circuit’s ruling.
“As we expected, the court reversed the district court’s decision that our client was an independent contractor,” Liss-Riordan wrote. “We expect judgment will be entered on his behalf back in the district court and we can then proceed to calculating the PAGA penalties GrubHub will have to pay, which will should be substantial at this point.”
Liss-Riordan added this decision is also significant because it rejects an argument that gig companies have been advancing in multiple cases: that Proposition 22 “abated” the ABC test.
“The court recognized that Prop 22 can only be a defense against misclassification claims if companies have complied with its requirements, which endorses our argument that we can still hold gig companies liable for misclassification if they are not providing the various benefits they are required to provide under Prop 22,” Liss-Riordan said.
Proposition 22 requires that covered gig workers receive guaranteed earnings of 120% of minimum wage, $0.30 reimbursement per mile for gas expenses, quarterly health care subsidies for drivers that work at least 15 hours per week, accident insurance for on-the-job injuries, an appeals process for deactivated drivers, and antidiscrimination and sexual harassment prevention protections.
Proposition 22 does not provide sick pay, family leave, unemployment insurance or a chance to be compensated for time waiting between rides or deliveries, a benefit gig workers have been fighting for in other lawsuits.
In August, an Alameda County Superior Court judge ruled that Proposition 22 is unconstitutional because it impermissibly restricts the Legislature’s power to regulate labor organizing and worker compensation rules. The decision is expected to be appealed.
In an emailed statement, Grubhub lawyer Theane Evangelis of the firm Gibson Dunn & Crutcher said the Ninth Circuit correctly held that Lawson’s suit could not be brought as a class action. She added Lawson already failed to prove his claims at trial in 2018, and that “the result should be the same on remand.”
“Drivers who use the Grubhub app are, and should be allowed to continue working as, independent contractors,” Evangelis said. “Grubhub looks forward to presenting its arguments to the district court.”
U.S. Circuit Judges Paul Watford, a Barack Obama appointee, and Daniel P. Collins, a Donald Trump appointee, joined Fletcher on the panel.
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