Photographer: Andrew Harrer/Bloomberg

It's GrubHub on Trial But Uber Has a Dog in This Fight Too

Updated on
  • Los Angeles actor is first to test gig-economy model at trial
  • Delivery driver was in business for himself, GrubHub argues

The gig economy -- and especially Uber Technologies Inc. -- is watching an aspiring Los Angeles actor.

Raef Lawson, who worked as a food-delivery driver for GrubHub Inc. for less than six months while pursuing a career as an actor and writer, is the first to go to trial in a U.S. court to challenge what some see as the future of the American workplace -- a model built on treating workers as independent contractors instead of as employees.

The dueling lawyers in Lawson’s case are also fighting in the same San Francisco federal courthouse over the status of hundreds of thousands of drivers for Uber in a lawsuit that has dragged on for four years. How such cases play out may shape the future of internet-enabled companies that pair customers with products and services through apps and typically avoid the costs of traditional employment.

U.S. Magistrate Judge Jacqueline Scott Corley, who has been hearing the GrubHub case without a jury, heard closing arguments Monday. She will be the first federal jurist to determine whether a gig-economy driver deserves the protections of employees under California law. Uber lost a similar case in the U.K. and is now appealing.

As the first so-called misclassification case of its kind in the U.S., the GrubHub trial “will inevitably be treated as a bellwether," said Charlotte Garden, an associate law professor at Seattle University.

"That’s especially true because the lawyers in this case are also involved in other larger and higher profile misclassification cases, including the Uber case," said Garden, who has followed the Uber litigation closely.

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The question of whether Lawson is an employee turns on how much control Corley concludes that GrubHub exerts over the work life of its drivers. The company, which competes with Uber in restaurant food delivery, argues Lawson decided when, where, and how frequently he performed door-to-door deliveries.

‘Heavy Burden’

In court Monday, Corley said the company’s power to terminate Lawson for any reason is of “inordinate” importance in her decision. The judge said GrubHub has the “heavy burden” of proving the “at-will” terms of employment doesn’t mean it controls the relationship.

Michele Maryott, a lawyer for GrubHub, told the judge both parties had “the right to end the contract.”

“Mr. Lawson had a lot of control in this relationship,” she said. “It’s not a unilaterally at-will provision.”

Lawson’s lawyer, Shannon Liss-Riordan, argued that indicators of GrubHub’s control over drivers include that the company expects them to be be available to accept assignments during shifts they sign up for and to remain in designated geographical areas.

She alleges that the company violated California labor laws by not reimbursing Lawson’s expenses, paying him less than minimum wage and failing to pay overtime.

‘Fiercely Competitive’

"With more and more companies attempting to avoid the employee label, in the fiercely competitive food delivery arena in particular, a company like GrubHub is effectively fueling a race to the bottom, making it nearly impossible for a law-abiding company to compete," Liss-Riordan said in a court filing.

Corley said she had concerns after learning that Lawson’s resume filed with the lawsuit was fabricated. She said the actor was “dishonest” when he lied about completing a three-year program.

“If he’s an employee, he’s an employee,” Corley said. “I know he’s willing to not tell the truth, we’ll have to see where it matters. That resume is really problematic to me.”

Liss-Riordan told the judge it’s a “straightfoward case” over GrubHub’s failure to prove Lawson is an independent contractor despite the company’s effort to “undermine him and his credibility.”

Lawson’s case has two phases. In the first part, he seeks to prove he was misclassified as a contractor. If he prevails, he can try to represent other California GrubHub drivers through the state’s Private Attorneys General Act, or PAGA, which gives employees the right to step into the shoes of the state labor secretary to bring enforcement actions.

Uber faces several employment suits filed under the same statute, in which penalties can apply retroactively on a per-pay-period basis and accrue to millions and even billions of dollars. Under PAGA, the state keeps 75 percent of any penalties won and the remaining 25 percent is a reward for the workers who bring the case.

An Uber spokesman declined to comment on the GrubHub case.

Even if Lawson wins, GrubHub may simply "tweak" its model, Garden said.

"If it loses this trial, I predict that it will make some minor changes to the way it operates, in the hope of heading off future liability," the law professor wrote said. "Other platform companies are presumably watching this case closely, and may do the same."

The case is Lawson v. GrubHub, 15-cv-05128, U.S. District Court, Northern District of California (San Francisco).

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