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Grubhub delivery driver avoids summary judgment on employee status

By Ronald Miller, J.D.

Grubhub was unable to dismiss on summary judgment a suit brought by a former delivery driver who claimed that he was an employee of the online food delivery service, not an independent contractor. Using California’s multi-faceted employment test, a federal district court in California concluded there was sufficient indicia of an employment relationship between the driver and Grubhub that a reasonable jury could find he should have been treated as an employee (Lawson v. Grubhub, Inc., July 10, 2017, Corley, J.).

Grubhub is an online and mobile food ordering company. Its users can place a food order for pickup or delivery. A former delivery driver designated as an independent contractor by Grubhub filed suit, alleging he was its employee, and so was entitled to minimum wage, reimbursement of expenses, and overtime compensation. In response, Grubhub filed a motion for summary judgment.

Driver requirements. Drivers are engaged to make deliveries for Grubhub via the company’s delivery service provider agreement. They must meet certain preliminary requirements before they can begin driving for Grubhub, including proof of a driver’s license and auto insurance, be 19 years old, have two years of driving experience, and pass a background check. Once hired, drivers go through an onboarding process. Drivers must use appropriate bags for insulating food, which they can either buy themselves or lease from Grubhub. Fees for the bags are waived if the driver wears a Grubhub shirt and hat. Drivers are required to use and maintain a smartphone at their own expense. They are also responsible for all equipment costs and expenses.

Restaurants can rate the performance of a driver. When Grubhub receives a driver complaint, a manager reviews the complaint and informs the driver. Decisions about whether to terminate a driver are made by Grubhub’s corporate employees and legal department with the input of driver specialists—employees who perform “spot checks” on drivers. Either Grubhub or the driver may terminate the provider agreement for either breach of contract or without cause upon 14 days written notice.

Grubhub drivers must download the necessary driver tools. If a delivery driver wants to deliver food to customers, he or she signs up for a “block” that specifies the time period and the specific region. When a block starts, the driver is “on-call” and cannot reject incoming orders or otherwise be unavailable. They must provide updates via the driver app and notify Grubhub of potential diner issues. Drivers choose what market or region they want to deliver in. Drivers can also receive orders when not signed up for a block by turning on the app and making themselves available.

Drivers are paid “service fees” of $4.25 per fulfilled delivery, plus $.50 per mile between the restaurant and customer. A driver is guaranteed a minimum average payment of $15 per hour if he or she accepts and fulfills at least 75 percent of orders received and is available for the entirety of each scheduled delivery block that week. A driver does not receive the hourly minimum when working outside of a scheduled block.

Right to control. In determining whether an individual can make a prima facie showing of an employment relationship under California law, the most significant consideration is the employer’s right to control work details. Here, the court determined that a reasonable trier of fact could find that Grubhub had the right to exercise all necessary control of the detail of the delivery driver’s work. The Grubhub contract contained an automatic renewal clause and could be terminated by either party upon 14 days written notice or upon breach of contract. Such an agreement, observed the court, is an indicator of an at-will employment relationship. When drivers want to sign up for deliveries, they sign up for blocks of time created by Grubhub managers, which are limited in number. According to the service agreement, drivers must sign up for weekly delivery blocks on the Grubhub driver app. Once a driver signs up for a block, he must remain available and deliver the majority of orders he receives or face potential termination. While drivers can make themselves available outside of the blocks, they are not eligible for the $15 hour minimum payment.

Secondary factors. A number of secondary indicia are also relevant to the employee-or-independent contractor determination. In this instance, a number of secondary factors pointed to an employment relationship. The driver’s work did not require a high level of skill. The indefinite nature of his tenure also indicated an employment relationship. The service agreement automatically renewed every 60 days. Also, a reasonable factfinder could conclude that the company’s oversight as to whether a driver was driving as scheduled and its complaint feedback system supported a finding of an employment relationship. Further, Grubhub’s business is to provide drivers so that customers can order from restaurants without drivers. Thus, a reasonable factfinder could conclude that Grubhub’s drivers were central to its business. Moreover, Grubhub’s two-step compensation system, with a guarantee of a minimum hourly pay, more closely resembled an employment relationship than contractor relationship.

Other factors weighed in favor of finding that the driver was an independent contractor. Grubhub drivers supply their own equipment (a vehicle or bicycle, and a smartphone to access the Grubhub app) and are not required to wear Grubhub clothing. Drivers are not required to work in a particular location, and may perform work for other companies while driving for Grubhub. Further, the parties apparently believed that they had created an independent contractor relationship.

Still, there existed sufficient indicia of an employment relationship between the driver and Grubhub such that a reasonable jury could find the existence of such a relationship. Therefore, under California’s multi-faceted test of employment, the court concluded that Grubhub’s motion for summary judgment must be denied.