They’re Not Employees, Grubhub Tells a Judge

SAN FRANCISCO (CN) — On the final day of a bench trial that could have far-reaching implications for the gig economy, an attorney accused Grubhub of using slyly crafted semantics to skirt labor laws.

“Grubhub thinks if it uses the right language, it can avoid complying with hour and wage laws,” attorney Shannon Liss-Riordan told U.S. Magistrate Judge Jacqueline Scott Corley in court Monday.

Liss-Riordan represents Raef Lawson, an aspiring actor from Los Angeles who worked as a Grubhub delivery driver from October 2015 to February 2016. Lawson says he was misclassified as an independent contractor and denied employment benefits, including minimum wage, overtime pay and reimbursement for his fuel and car expenses.

Grubhub says Lawson could set his own schedule, reject delivery assignments and work for Grubhub’s competitors during his shifts — benefits that an employee would not enjoy.

Though the case focuses solely on one driver’s labor spat, it could set a precedent and affect whether start-up technology firms like Uber and Lyft can continue to rely on the cheaper labor of independent contractors to fuel their meteoric growth.

Both sides presented closing arguments Monday, nearly seven weeks after a six-day bench trial held in early September.

In her final pitch, Liss-Riordan said the company uses “Grubhub speak” to re-label words and create a false narrative to justify its misclassification of drivers as contractors.

The company uses words such as “blocks” instead of “shifts,” “offered” instead of “assigned,” “toggle on and off” instead of “punch in and out” and a “true-up” incentive program for pay rather than “docking an hourly rate” for drivers that fail to accept most orders, Liss-Riordan said.

Grubhub attorney Michelle Maryott attacked Lawson’s credibility. She said he lied on his resume, contradicted his deposition testimony at trial, and used dishonest methods to avoid making deliveries while keeping his order acceptance rate and pay rate high, allowing him to earn nearly $100 per delivery during some shifts. She said Lawson would toggle off or delay delivering orders for an hour or longer to game the system.

“It’s clear Mr. Lawson will lie and say anything to get what he wants,” Maryott said.

Only drivers who accept 75 to 85 percent of delivery assignments earn a guaranteed hourly rate of $11 to $15 per hour, or “true-up” rate. Otherwise, they get a flat fee for each delivery, which sometimes amounts to less than minimum wage.

Grubhub calls its “true-up” rate an incentive program that encourages drivers to accept more orders.

Lawson calls it a penalty system that Grubhub uses to exert more control over drivers.

Although Lawson agreed to be a contractor when he signed up to work for Grubhub, a 1989 ruling from the California Supreme Court, S.G. Borello & Sons Inc. v. Dept. of Industrial Relations, establishes a multi-factor test to determine a worker’s employment status. The primary factor is how much control an employer wields over its worker.

On Monday, Judge Corley did not hesitate to let Grubhub and Lawson know what evidence she thought weighed in each one’s favor.

The fact that Lawson signed up to work for Grubhub in August 2015 but did not sign up for a shift or make his first delivery until two and a half months later supports Grubhub’s argument that Lawson made his own schedule, the judge said.

But she refused to accept that because Lawson signed a contract agreeing to be an independent contractor, that meant he believed he was an independent contractor. She said a party’s own belief about whether he or she is a contractor is the “least important” of the 11 sub-factors in the Borello test.

Other sub-factors include whether the worker or employer provides the tools needed to do the job; whether a special skill is required; whether the work is supervised; whether the opportunity for profit or loss depends on the worker’s managerial skill; how long the service is performed; how permanent the working relationship is; the method of payment (by time or by job); and whether the work performed supports the employer’s principal business.

Grubhub’s Chief Operating Officer Stanley Chia testified in September that Grubhub is primarily an online marketing tool for restaurants and that its delivery drivers do not support the company’s core or principal business.

But Liss-Riordan said Monday that the company is aggressively expanding its food-delivery service, buying up competitors and investing millions of dollars in food delivery, which she said will be necessary for the company’s survival in major markets like Los Angeles.

Maryott, however, argued that although Grubhub is expanding that that side of its business, delivering food for restaurants remains only a small portion of the company’s revenue strategy.

Corley did not appear to buy that argument.

“I’d like to have Grubhub stand up and make that argument to their investors,” she said.

After five hours of debate, Corley thanked both sides, saying she does not expect her ruling to end the ongoing dispute over use of independent contractors in the fast-growing gig economy.

“I doubt I will be the last word,” she said.

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