Lawson v. Grubhub, Inc.

• Decision Date: 08 February 2018
• Docket Number: Case No.15–cv–05128–JSC
• Citation: 302 F.Supp.3d 1071
• Parties: Raef LAWSON, Plaintiff, v. GRUBHUB, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of California

302 F.Supp.3d 1071

Raef LAWSON, Plaintiff,

v.GRUBHUB, INC., et al., Defendants.

Case No.15–cv–05128–JSC

United States District Court, N.D. California.

Signed February 8, 2018

Matthew David Carlson, Lichten & Liss–Riordan, P.C., San Francisco, CA, Shannon Liss–Riordan, Thomas Fowler, Lichten & Liss–Riordan, P.C., Boston, MA, for Plaintiff.

Theodore J. Boutrous, Jr., Brandon J. Stoker, Theane Evangelis Kapur, Justin Tyler Goodwin, Gibson Dunn & Crutcher LLP, Los Angeles, CA, Dhananjay Saikrishna Manthripragada, Gibson Dunn and Crutcher, Washington, DC, Kevin Joseph Ring–Dowell, Megan M. Cooney, Michele Leigh Maryott, Gibson, Dunn & Crutcher LLP, Irvine, CA, for Defendants.

OPINION

JACQUELINE SCOTT CORLEY, United States Magistrate Judge

Raef Lawson worked as a restaurant delivery driver for Grubhub in Southern California for four months in late 2015 and early 2016. He complains that Grubhub improperly classified him as an independent contractor rather than an employee under California law and in doing so violated California's minimum wage, overtime and employee expense reimbursement laws. He brings his claims in his individual capacity and as a representative action pursuant to the California Private Attorney General Act (PAGA). The critical question is whether under California's common law Borello test, Mr. Lawson was an employee or an independent contractor. After considering all of the Borello factors as a whole in light of the trial record, the Court finds that Grubhub has satisfied its burden of showing that Mr. Lawson was properly classified as an independent contractor. While some factors weigh in favor of an employment relationship, Grubhub's lack of all necessary control over Mr. Lawson's work, including how he performed deliveries and even whether or for how long, along with other factors persuade the Court that the contractor classification was appropriate for Mr. Lawson during his brief tenure with Grubhub.

PROCEDURAL HISTORY

This lawsuit began when San Francisco Grubhub driver Andrew Tan filed a putative wage and hour class action in a California state court. Grubhub subsequently removed the action to this Court pursuant to the Class Action Fairness Act. Shortly thereafter, Mr. Tan filed a First Amended Complaint that added Raef Lawson as a plaintiff and the proposed class representative, and as a co-plaintiff on the PAGA claim. Mr. Tan was only a plaintiff on the PAGA claim and no longer sought to represent a Rule 23 class. Following a ruling on Grubhub's motion to dismiss, Plaintiffs filed a Second Amended Complaint with the same claims.

Grubhub then moved to deny class action status. It argued that its delivery services provider contract contained an arbitration agreement with a class action waiver during the proposed class period. While the arbitration agreement allowed a driver to opt out, Mr. Lawson was one of only two California drivers during the relevant period to have done so; accordingly, the Court granted the motion to deny class action status. In particular, the Court held that Mr. Lawson was not a typical nor adequate class representative for the delivery workers who had not opted out. (Dkt. No. 65.)¹

Following that ruling, the parties agreed that this lawsuit would be prosecuted solely by Mr. Lawson on behalf of himself and as a PAGA representative. (Dkt. Nos. 70 at 4 n.1, 78.) The parties subsequently stipulated to a bench trial, and to bifurcating the case into two phases: (1) phase one limited to Mr. Lawson's individual claims and whether he is an "aggrieved employee" under PAGA, and (2) assuming the Court finds he is an aggrieved employee, phase two would resolve the PAGA claim following additional discovery. (Dkt. Nos. 97, 122.)

The Court held a bench trial in September 2017 and following the parties' submission of proposed findings of fact and conclusions of law, heard closing arguments on October 30, 2017. This Opinion constitutes the Court's findings of fact and conclusions of law required by Federal Rule of Civil Procedure 52(a).

JURISDICTION

This Court has subject matter jurisdiction pursuant to the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d)(2). The complaint Grubhub removed to federal court satisfied CAFA's jurisdictional requirements: diversity, numerosity and the amount in controversy. (Dkt. No. 1.) The Court's subsequent denial of class action status did not divest it of subject matter jurisdiction. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int'l Union v. Shell Oil Co. , 602 F.3d 1087, 1092 (9th Cir. 2010). Further, the parties have consented to the jurisdiction of a magistrate judge. (Dkt. Nos. 13, 14, 30, 33.)

FACTUAL FINDINGS

A. The Parties

Grubhub is an internet food ordering service that connects diners to local restaurants. The company was founded in 2004 as an online platform where diners could order food from local restaurants. Grubhub began offering food delivery in select markets in 2014. Customers order food through Grubhub's online platform and Grubhub transmits the orders to restaurants. The food is then delivered either by a restaurant delivery person or a Grubhub driver. Diners may also pick up their own meals ordered through Grubhub.

Grubhub operates in 1,200 markets in the United States. Of those markets, 250 are in California and of those Grubhub offers its own delivery services in five. As of June 2016, there were 4,000 Grubhub delivery drivers in California. Delivery is a growing part of Grubhub's business; indeed, it was aggressively growing its delivery business in 2015. By providing delivery services, Grubhub increases the number of restaurants it can offer to diners on its online platform. In the five California markets where Grubhub offers delivery services, the majority of Grubhub's diners have their meals delivered by the restaurants. For the remaining customers, Grubhub delivers meals more than the customers pick up the food themselves. The percentage of Grubhub-provided deliveries is growing.

Plaintiff Rael Lawson lives in Inglewood, California, a neighborhood in Los Angeles. At all times relevant to this lawsuit, he was an aspiring actor, writer, producer and director. In August 2015, Mr. Lawson completed an online application to make food deliveries for Grubhub and submitted the required documents: a driver's license, vehicle registration, and vehicle insurance. Mr. Lawson performed food deliveries for Grubhub over a four month period: from October 25, 2015 through February 14, 2016. Prior to performing Grubhub food deliveries, Mr. Lawson worked for other so-called "gig economy" companies, including Lyft, Uber, Postmates, and Caviar. He drove for these companies, including Grubhub, because the flexible scheduling allowed him to pursue his acting career. Mr. Lawson continued to deliver food for Postmates and Caviar during the four months he was delivering for Grubhub.

B. The Grubhub Delivery Services Provider Contract

1. The Initial Contract

Mr. Lawson executed a "Delivery Service Provider Agreement" with Grubhub on August 28, 2015. The Agreement includes the following terms, among others:

• Relationship of Parties: The "Primary Delivery Service Provider" (Mr. Lawson) is engaged in the "independent business of providing delivery services." (Trial Ex. 1 ¶ 2.1.) The parties intend the agreement to create the relationship of principal and independent contractor, not employer and employee. (Trial Ex. 1 ¶ 7.1.) The driver² acknowledges that if at any time he believes his relationship with Grubhub is something other than an independent contractor relationship, the driver will immediately notify Grubhub of this view. (Trial Ex. 1 ¶ 7.2.)

• Performing Services for Others : The driver is not precluded from doing business with others and Grubhub does not have the right to restrict the driver from being concurrently or subsequently engaged in performing delivery services for other companies, even those that compete with Grubhub. (Trial Ex. 1 ¶ 2.4.)

• Availability : There is no specific minimum period of time for which the driver must make himself available. Each day the driver makes himself available is treated as a separate contractual engagement. The driver has complete discretion to select the dates he is available to perform the delivery services and has no obligation to make himself available on any particular date. However, once the driver agrees to an engagement, the driver is contractually bound to fully perform the engagement on the specified date. (Trial Ex. 1 ¶ 3.1.)

• Contractors : The driver may use contractors or subcontractors to perform the delivery services. In such cases the service fee is still paid to the contracted driver who has the sole responsibility of setting the terms of his payments to any contractors or subcontractors. (Trial Ex. 1 ¶ 3.2.)

• Service Level Agreement : The driver agrees to comply with Appendix A, the "Service Level Agreement," which requires that the driver: (1) download the necessary tools to fulfill orders, (2) sign up for weekly blocks either through the Grubhub driver app or other means, (3) provide a status update to a dispatcher that the driver is "on call" when a delivery block starts, (4) not reject incoming orders or be otherwise unavailable to receive incoming orders during any scheduled delivery block with exceptions for "extenuating circumstances" if the driver timely communicates such circumstances to a dispatcher, (5) provide status updates upon arrival at a restaurant, after receiving the food, and leaving the restaurant for delivery, (6) communicate with the care team or a dispatcher if there are diner issues, and (7) have no more than one moving violation in 24 months and no involvement in any at fault accidents. Failure to comply with this provision constitutes a material breach. (Trial Ex. 1 ¶ 3.3; Appendix A Service Level Agreement.)

• Delivery Service Failure : If the driver fails to fully perform a delivery he is contractually bound to perform, fails to

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