Python vs. Boa: Does the GrubHub Misclassification Ruling Really Matter? (Don’t Believe the Hype!)

Python vs boa - independentr contractor misclassification and grubhubPythons and boa constrictors usually do not fight each other. At least that’s what I learned in herpetology school. The reason they don’t fight each other is that there’s too much risk. The boa risks getting bitten by the python’s lethal fangs. The python risks being constricted to death because that’s how constrictors work.

For roughly the same reason, independent contractor vs. employee disputes rarely go to trial. There’s too much to lose. A company that relies on independent contractors for its business model cannot afford a ruling that all of its contractors are really employees. That’s why these cases almost always settle.

The GrubHub case, however, which was decided late last week, is different. It actually went to trial. That’s why you may have heard about it (such as here).

But how much does the GrubHub case matter? Many bloggers are treating this decision as if it has widespread ramifications. I’m not so sure. Let’s take a look.

What happened?

Raef Lawson, and aspiring actor/writer/producer/delivery driver, signed up to drive for GrubHub in Los Angeles in 2015. He almost definitely planned to sue before he even started, hiring a lawyer and then gaming the system mercilessly so he would get paid even for blocks of time when he barely made any deliveries. A few months later, he filed a lawsuit claiming that he should have been classified as an employee, which would have entitled him to myriad benefits under California wage and hour law.

He tried to bring a class-action on behalf of all 4,000 GrubHub drivers in California, but ultimately this case was decided on an individual basis. There was probably only about $600 at issue.

GrubHub, to its credit, tried the case.

On February 8, after a bench trial, the judge ruled that Lawson was an independent contractor, not an employee.

So this is great news all around for businesses who use independent contractors, right? They are all vindicated? Not exactly. Contrary to what many other bloggers have been writing, I don’t think this case means a whole lot. Or maybe it does. Let’s take a look.

This case matters a lot. This decision vindicates GrubHub’s business model. It shows that an independent contractor delivery driver model can work and can survive a challenge that the drivers are misclassified as employees. It shows that, if done right, using independent contractors can be a viable business model.

This case doesn’t matter. This case was decided on the specific facts relating to GrubHub and Lawson, including how he used the app and how GrubHub ran its delivery business. The ways that GrubHub’s app and delivery driver relationship work are highly specific to GrubHub and therefore this decision will have only a minimal effect on other companies using independent contractors.

This case matters a lot. The facts in this case provide a roadmap for other businesses who want to have successful independent contractor arrangements. GrubHub did not supervise, train, discipline, or monitor Lawson. It did not require him to wear a uniform, did not require a specific kind of vehicle (bike is ok!), and did not control the days or hours he chose to work. GrubHub had a carefully drafted independent contractor agreement. It was long and specific about what GrubHub could not control. It was not an off-the-shelf agreement.

This case doesn’t matter. This case was decided under California law, not federal law. And California law might be about to undergo a facelift. This case was decided under the
S. G. Borello test, which is California’s state-specific version of a right to control test with 8 secondary factors that must also be considered. Picture a right to control test with an octopus on top of it. No other states have that test.

As we wrote here, however, California may be about to abandon that test in favor of a much more difficult to meet ABC test. The ABC test being considered by the California Supreme Court would start with the presumption that a worker is an employee and would require a business to meet each of three distinct tests to establish that the worker is actually an independent contractor. This would be a major change in California law. In fact, Lawson’s attorney asked the judge not to rule in this case until California Supreme Court decides whether to change the test. Had the ABC test been in effect instead of the S.G. Borello test, the outcome in this case might have been different.

This case matters some. At the end of the day, I am ambivalent.

Parts of the GrubHub model could be useful for other businesses as a roadmap, but the facts for another businesses are not going to line up the same. Also, this case was decided under a uniquely California test which might be about to change. Remember, different laws apply different tests for determining whether someone is properly classified as an independent contractor or should be an employee. A person can be an independent contractor under some tests (like the S.G. Borello test) but an employee under another test (like an ABC test, maybe).

Regardless of whether you decide this case matters for your business or doesn’t matter, independent contractor misclassification remains a high risk endeavor. Much like a fight between a python and a boa constrictor.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in Los Angeles on Feb. 27 or Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.