Victory For Grubhub In First-Ever Gig Economy Trial

Author:Mr Richard Meneghello
Profession:Fisher Phillips LLP

Three Things All Gig Economy Companies Need To Know About Decision

In what is believed to be the first time in our nation's history that a trial court has reached a judicial merits determination in a gig economy misclassification case, a federal judge in California ruled in favor of the company this afternoon and found that a delivery driver was properly classified as an independent contractor. By rejecting the driver's claim that he was actually an employee deserving of minimum wage, overtime, and other benefits associated with employee status, the court handed gig economy companies everywhere a groundbreaking victory.

What do all gig economy companies (and other businesses using a freelance or independent contractor model) need to know about today's historic ruling in the Lawson v. Grubhub trial? Here are the three key takeaways from the ruling.

The Court Found That Grubhub Did Not Have The "Right To Control" Its Drivers.

By way of quick background, this case involves a former GrubHub driver named Raef Lawson who first attempted to bring a class action lawsuit against the on-demand food delivery service, claiming that he and many other delivery drivers should have been classified as employees instead of independent contractors. The judge did not allow him to proceed with a class action, however, only permitting him to proceed with a claim for under $600 in allegedly unreimbursed expenses—to which he would only be entitled if he is found to be an employee, not a contractor.

If he made it past the initial misclassification hurdle in the judge's eyes, however, his attorney indicated it would open the door to thousands of similar drivers prevailing under California's notorious Private Attorneys General Act (PAGA). More significant, however, was the possibility that such a ruling would start a snowball effect and lead to other rulings against gig economy companies, given that the overwhelming number of businesses in this new realm—think Uber, Lyft, Postmates, Handy, TaskRabbit, and others—use an independent contractor system with their workers.  

The case went to a bench trial in September, the parties made their final arguments in written briefs soon thereafter, and closing arguments were heard on October 30. Over three months later, Judge Jacqueline Scott Corley issued her final ruling today, and businesses operating in the gig economy can certainly say it was worth the wait.

The key to her decision: a finding that Grubhub lacked necessary control...

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