GRUBHUB DELIVERY DRIVER CASE ALLEGING IC MISCLASSIFICATION REVERSES COURSE AGAIN. A federal court has reversed course and held that a Grubhub delivery driver is an employee, not an independent contractor, and that Grubhub had been unable to establish the “business-to-business” exemption to California’s ABC test. The driver brought suit against Grubhub in 2015 alleging that he had been misclassified as an IC under California law and that in doing so Grubhub violated California’s minimum wage, overtime, and employee reimbursement laws. As discussed in detail in our blog post of February 8, 2018, the court concluded, following a bench trial in 2017, that Grubhub properly classified the driver as an IC under the then-existing Borello test and entered judgment in Grubhub’s favor. Subsequently, the California Supreme Court issued its decision in Dynamex, which enunciated that a new test – the so-called three-pronged ABC test and not the multi-factor test under Borello – governed the driver’s minimum wage and overtime compensation claims. Thereafter, as noted above, the legislature passed A.B. 5, containing a number of exemptions from the ABC test for certain industries.
Ultimately, the Grubhub case reached the U.S. Court of Appeals for the Ninth Circuit, which vacated and remanded the matter back to the district court for review under the ABC test and any applicable exemptions in A.B. 5. Although Grubhub argued that the “business-to-business” exemption applied, following remand the district court disagreed and concluded that Grubhub failed to demonstrate two of the eleven factors necessary to satisfy the exemption – that the driver advertised and held himself out to the public as available to provide services, and that he actually negotiated his own rates or could do so. Having failed to satisfy the exemption, the court then considered whether Grubhub met the ABC test. The court concluded that Grubhub failed to meet its burden to establish prong B of the ABC test. That prong requires a showing that the driver “performs work that is outside the usual course of [Grubhub’s] business,” which the court found was connecting restaurants with diners to facilitate food ordering. Because Grubhub failed to establish Prong B, the court held that it did not meet the ABC test and, as a result, the driver was properly classified as an employee for purposes of his minimum wage and overtime claims. The court clarified that although the driver was entitled to judgment on his minimum wage claim, Grubhub was entitled to judgment on the overtime claim because the driver did not work more than 40 hours per week. Lawson v. Grubhub, Inc., No. 3:15-cv-05128 (N.D. Cal. Mar. 30, 2023).