Grubhub Lawsuit: Driver Is Independent Contractor, Not Employee

Grubhub LawsuitA US judge in San Francisco recently ruled that a former driver for Grubhub Inc. was an independent contractor and not an employee. The Grubhub lawsuit is the first case of its kind against a gig economy company that has gone to trial.

Grubhub Lawsuit Finds Lack of Control

On February 8, 2018, US Magistrate Judge Jacqueline Scott Corley said that Grubhub did not control former driver Raef Lawson’s work, so it was not his employer according to California law. As a Chicago-based company, Grubhub did not supervise Mr. Lawson or tell him when to work, what routes to take for his deliveries, or what kind of transportation to use.

This ruling may prove to be significant, as gig economy companies such as Grubhub, Uber, and Lyft have long maintained that their workers are independent contractors, not employees. Consequently, they are not entitled to minimum wage, workers’ compensation benefits, overtime payments, or other legal protections that are typically afforded to employees.

The judge’s decision could impact a series of lawsuits nationwide accusing gig economy companies of misclassifying workers as independent contractors and thereby costing them millions of dollars in pay, overtime, and expenses.

“Not a Food Delivery Service”

Mr. Lawson had worked for the company for four months but was blocked from Grubhub’s smartphone app in 2016 because he was not making deliveries when he was signed on.

The Grubhub lawsuit stated that multiple factors showed that he was an employee. For example, delivery work was essential to the company’s business model. Moreover, Grubhub typically paid a minimum hourly rate instead of a fee for delivery.

In defending against the Grubhub lawsuit, the company argued, somewhat surprisingly, that it was not a food delivery service, but rather a software development company, so delivery drivers like Mr. Lawson were not central to its business. Furthermore, it did not have the control over its drivers required for establishing an employer-employee relationship.

Judge Corley agreed, saying that the company’s lack of control over how the driver performed his deliveries meant that he was an independent contractor.

Independent Contractors vs. Employees

As you may see from the rise of gig economy companies, more and more employers are choosing to hire independent contractors instead of traditional employees. What is the difference between the two? And how does your status as an independent contractor impact your ability to receive workers’ compensation benefits?

You are likely familiar with the concept of a traditional employee: Somebody who works for an employer for a salary or for hourly wages, and often with benefits such as health insurance, retirement accounts, and unemployment benefits.

An independent contractor, however, is considered a freelancer or self-employed person who is paid to perform services for another person or business. How is that different from an employee?

Independent contractors do not directly work for the company hiring them, so they have more control over how they do the job that they have been hired to do, such as setting their own hours, than employees do.

Because independent contractors are not employees, the businesses hiring them do not withhold payroll taxes from the money paid to them, and they typically do not receive unemployment benefits if they are fired.

Workers’ Compensation Benefits

But if an independent contractor is hurt on the job, would he or she be eligible to receive workers’ compensation benefits?

Workers’ compensation is a system to provide benefits for all injured employees in the State of Illinois with some exceptions, such as Chicago Police officers, federal employees, and interstate commerce railroad workers. Benefits typically include:

  • Payment for reasonable medical treatment related to the work injury.
  • Temporary Total Disability, or weekly payments that an employee earns while out of work, typically equal to two-thirds of the employee’s weekly earns.
  • An award or settlement for any permanent disability.

Workers’ compensation is a no-fault system of benefits, meaning that an employee does not need to prove that his or her employer, co-employee, or anyone else was at fault for the incident. As long as the injury occurred in the scope and course of employment, the employee should be covered.

Independent Contractors’ Rights

Because they are not employees, independent contractors such as Uber drivers are not eligible for workers’ compensation in Illinois.

Some companies use that distinction to their advantage, misclassifying workers as independent contractors so they can avoid workers’ compensation payments, payroll taxes, unemployment benefits, and other expenses, as the Grubhub lawsuit alleged.

However, in certain cases, these “independent contractors” may still be eligible for workers’ compensation benefits under Illinois law. That is because the Illinois Workers’ Compensation Commission takes a number of factors into consideration to determine whether someone is actually an employee in all but name only or a genuine independent contractor.

If it can be shown that employers exercise similar control over “independent contractors,” a case could be made that they could be eligible for workers’ compensation benefits in the same way that employees are.

Factors suggesting control over an independent contractor could include being exclusively bound to work for the employer, getting a schedule, receiving specific instructions on how to do the job, having to wear a uniform, or receiving materials or tools from the employer.

In these and other instances, so-called “independent contractors” may actually be considered employees eligible for workers’ compensation benefits for their injuries.

Chicago Workers’ Compensation Lawyers

As you can probably see, workers’ compensation claims can be complicated, particularly in the case of misclassified workers. If a worker is unable to prove that he or she is actually an employee, that worker may not qualify for the compensation he or she deserves. For that reason, many injured workers find that they benefit from the guidance of an experienced and knowledgeable attorney, like the Chicago workers’ compensation attorneys at GWC Injury Lawyers, Illinois’ largest Workers’ Compensation and Personal Injury law firm.

If you have been injured on the job, please contact GWC today to schedule a free consultation with one of our workers’ compensation attorneys. Call our office at (312) 464-1234 or click here to chat with one of our representatives.