Lawyers in GrubHub Gig Economy Trial Make Final Arguments in Independent Contractor Misclassification Case, But Decision Is Unlikely To Be As Momentous As Many Predict

The lawyers for GrubHub and the driver who is among thousands who sued the company for independent contractor misclassification made their closing arguments earlier today before federal Magistrate Judge Jacqueline Scott Corley. The case, which is said to be the first gig economy case to be tried in court, was not tried by a jury but rather by a judge in a bench trial.  Because many legal commentators and media outlets have referred to this as a “bellwether” case, the judge’s questions at closing oral argument today have been as closely scrutinized as some U.S. Supreme Court oral arguments.  But, as explained below, this sharing economy case is unlikely to be momentous from a legal standpoint.

Why? Cases of this nature dealing with a single individual frequently turn on their particular facts, which can differ from case to case.  Differing facts often lead to different results regarding the proper classification of workers.  Thus, where the evidence varies from one case to the next, another court may reach a different decision in other cases involving drivers or other on-demand workers providing services to companies in the gig economy.  Indeed, the decision in this case may not even be a precedent for other drivers at GrubHub.

This lack of precedential value is more pronounced in cases that might be fairly be characterized as falling in the “gray“ area – where some facts favor independent contractor status and other facts favor employee status.  In those types of cases, a difference in one or more key facts can sometimes completely change the outcome of a legal decision as a matter of law.  Moreover, where the facts on key issues are in dispute, the court has to decide which witnesses to credit and which to discredit, and that determination can critically affect the outcome of a case.  As noted below, this case may well turn on the credibility of witnesses.

What the Judge Said At Oral Argument 

Judge Corley made it clear at the closing oral argument today that she was wholly unimpressed with the credibility of the plaintiff, Raef Lawson, reportedly stating:

“In this case, he produced a fabricated resume.  He represented that he got his degree from this three-year program, which he did not complete. That’s dishonest.  Number two, while this case was ongoing, he applied again to work for GrubHub.  I don’t know why. He used a different name, a different email address, and when he was asked whether he had worked for GrubHub before, he said no. So, I do have an issue with his credibility.  I know he’s not willing to tell the truth.”

Judge Corley also reportedly questioned the statement by Lawson’s lead counsel that the court should look at the case “wholistically.”  The judge responded, “Why should I look at it that way?”

But Judge Corley did not, however, give GrubHub’s lawyers an easy time. She reportedly grilled its lead counsel about Lawson’s termination, noting that the at-will nature of the right to terminate, which GrubHub retained in its contract with Lawson, “has inordinate importance.” She also reportedly mentioned that under the law, the company has a “heavy burden” to establish that Lawson is an independent contractor.

What Did the Evidence Show at Trial?

The papers submitted to the court in the past week by the lawyers for both sides presented stark contrasts in how each party views the evidence presented in this case. Lawson’s lawyers presented the following key “facts” that they believe were established at the trial:

  • GrubHub retained the right to terminate Lawson’s engagement at will;
  • Drivers were terminated by GrubHub in its discretion, without notice or explanation;
  • Lawson was instructed to be “polite and respectful to businesses and customers”;
  • Lawson was required to use an insulated food delivery bag;
  • GrubHub closely monitored its drivers’ work;
  • drivers were expected to accept every order possible and faced negative consequences if they did not;
  • in practice, drivers had limited ability to choose their schedule;
  • GrubHub set the drivers’ rate of pay;
  • drivers were expected to remain in their designated geographical zones while on shift;
  • Lawson worked under GrubHub’s direction and control, monitoring his every move electronically;
  • GrubHub required Lawson to “toggle” when he was unavailable and removed him from a block of time he had selected if he took off too much time during that shift;
  • Lawson was not engaged in a distinct business;
  • GrubHub handled complaints and issues with restaurants and customers and did not allow Lawson to remedy customer issues.

The lawyers for GrubHub presented a wholly different view of the key evidence at trial:

  • GrubHub did not have a right to control the manner and means by which Lawson performed his services;
  • Lawson was not supervised as to how he performed deliveries;
  • Lawson provided the car and other tools for his work;
  • Lawson worked when and where he wished to work;
  • GrubHub did not require Lawson to only work for it, and he worked for a number of other companies providing delivery services;
  • Lawson used his skill in performing deliveries;
  • Lawson had the right to use his own employees or subcontractors;
  • Lawson filed income tax returns as a self-employed business owner;
  • GrubHub allowed Lawson to choose his own vehicle of any make or model;
  • Lawson could choose any driving route he wished;
  • Lawson could choose what to wear while providing services;
  • GrubHub had no control over the delivery bags Lawson used.

Plainly, some of the key facts were disputed by the parties, particularly whether GrubHub directed and controlled the performance of services rendered by Lawson. Based on her comments at the oral argument today, it is more likely that Judge Corley will discredit Lawson’s testimony where it was disputed by witnesses for GrubHub.  That may be a huge hurdle for Lawson to overcome, but it is hardly insurmountable in view of the number of factors favoring both sides’ positions.

Analysis and Takeaways

There are other reasons why court decisions in the area of independent contractor misclassification typically do not serve as a precedent for other cases. Besides a different fact pattern from one case to another, independent contractor laws vary considerably from state to state; likewise, there are different tests for independent contractor status under various federal laws – as noted in this author’s White Paper and a number of prior blog posts and articles.

Many of the tests for independent contractor have one common factor: they oftentimes address various factors but say that no one fact is determinative of independent contractor or employee status. In the case that currently governs California law, S.G. Borello & Sons v. Department of Industrial Relations, 48 Cal. 3d 341, (1989), the California Supreme Court has stated that the factors a court should consider in reaching a decision on a worker’s status “cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.”  The U.S. Labor Department, in commenting on the test for independent contractor status under the federal wage and hour law, similarly states in its Fact Sheet on the issue:

“The Supreme Court has indicated that there is no single rule or test for determining whether an individual is an employee or independent contractor for purposes of the FLSA. The Court has held that the totality of the working relationship is determinative, meaning that all facts relevant to the relationship between the worker and the employer must be considered.”

Nonetheless, even cases that may not serve as legal precedents due to their varied facts can be given great weight by stakeholders on both sides of a dispute. On the one hand, if Judge Corley decides that Lawson is an independent contractor, those who support independent contractor classifications in the gig industry will undoubtedly latch onto the court’s decision in GrubHub to support the use of the independent contractor classification throughout the industry.  On the other hand, if Judge Corley decides that GrubHub misclassified Lawson, those who regularly argue that virtually every 1099er has been misclassified will almost certainly try to use the decision as a moral if not a legal precedent that businesses in the on-demand economy routinely misclassify employees as independent contractors.

Those companies that use independent contractors as part of their business model or to supplement their workforce would be wise to view this case as a signal to enhance their current state of independent contractor compliance. Many companies using independent contractors are not in compliance with such laws and are likely targets for regulatory agencies and class action lawyers.  Even companies that regard themselves as being in compliance with an array of state and federal independent contractor laws are able to considerably fortify their level of compliance. How can companies do so?

Many businesses using independent contractors have utilized a process such as IC Diagnostics™ to restructure, re-document, and/or re-implement their independent contractor relationships. By so doing, they are able to minimize the likelihood that a governmental agency or class action lawyer will even attempt to challenge their independent contractor relationships – and if a challenge is mounted, they are well positioned to maximize the likelihood that the relationship will be upheld as valid.

Written by Richard Reibstein

 

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