Tan v. Grubhub, Inc.

Filing 221

OPINION. Signed by Magistrate Judge Jacqueline Scott Corley on 2/8/2018. (ahm, COURT STAFF) (Filed on 2/8/2018)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 RAEF LAWSON, Plaintiff, 8 9 10 United States District Court Northern District of California 11 Case No.15-cv-05128-JSC OPINION v. GRUBHUB, INC., et al., Defendants. 12 13 Raef Lawson worked as a restaurant delivery driver for Grubhub in Southern California for 14 four months in late 2015 and early 2016. He complains that Grubhub improperly classified him as 15 an independent contractor rather than an employee under California law and in doing so violated 16 California’s minimum wage, overtime and employee expense reimbursement laws. He brings his 17 claims in his individual capacity and as a representative action pursuant to the California Private 18 Attorney General Act (PAGA). The critical question is whether under California’s common law 19 Borello test, Mr. Lawson was an employee or an independent contractor. After considering all of 20 the Borello factors as a whole in light of the trial record, the Court finds that Grubhub has satisfied 21 its burden of showing that Mr. Lawson was properly classified as an independent contractor. 22 While some factors weigh in favor of an employment relationship, Grubhub’s lack of all necessary 23 control over Mr. Lawson’s work, including how he performed deliveries and even whether or for 24 how long, along with other factors persuade the Court that the contractor classification was 25 appropriate for Mr. Lawson during his brief tenure with Grubhub. 26 27 28 PROCEDURAL HISTORY 1 2 This lawsuit began when San Francisco Grubhub driver Andrew Tan filed a putative wage 3 and hour class action in a California state court. Grubhub subsequently removed the action to this 4 Court pursuant to the Class Action Fairness Act. Shortly thereafter, Mr. Tan filed a First 5 Amended Complaint that added Raef Lawson as a plaintiff and the proposed class representative, 6 and as a co-plaintiff on the PAGA claim. Mr. Tan was only a plaintiff on the PAGA claim and no 7 longer sought to represent a Rule 23 class. Following a ruling on Grubhub’s motion to dismiss, 8 Plaintiffs filed a Second Amended Complaint with the same claims. Grubhub then moved to deny class action status. It argued that its delivery services 9 provider contract contained an arbitration agreement with a class action waiver during the 11 United States District Court Northern District of California 10 proposed class period. While the arbitration agreement allowed a driver to opt out, Mr. Lawson 12 was one of only two California drivers during the relevant period to have done so; accordingly, the 13 Court granted the motion to deny class action status. In particular, the Court held that Mr. Lawson 14 was not a typical nor adequate class representative for the delivery workers who had not opted out. 15 (Dkt. No. 65.) 1 Following that ruling, the parties agreed that this lawsuit would be prosecuted solely by 16 17 Mr. Lawson on behalf of himself and as a PAGA representative. (Dkt. Nos. 70 at 4 n.1, 78.) The 18 parties subsequently stipulated to a bench trial, and to bifurcating the case into two phases: (1) 19 phase one limited to Mr. Lawson’s individual claims and whether he is an “aggrieved employee” 20 under PAGA, and (2) assuming the Court finds he is an aggrieved employee, phase two would 21 resolve the PAGA claim following additional discovery. (Dkt. Nos. 97, 122.) 22 The Court held a bench trial in September 2017 and following the parties’ submission of 23 proposed findings of fact and conclusions of law, heard closing arguments on October 30, 2017. 24 This Opinion constitutes the Court’s findings of fact and conclusions of law required by Federal 25 Rule of Civil Procedure 52(a). 26 27 1 28 Record citations are to material in the Electronic Case File (“ECF”); pinpoint citations are to the ECF-generated page numbers at the top of the documents. 2 1 JURISDICTION 2 This Court has subject matter jurisdiction pursuant to the Class Action Fairness Act 3 (CAFA), 28 U.S.C. § 1332(d)(2). The complaint Grubhub removed to federal court satisfied 4 CAFA’s jurisdictional requirements: diversity, numerosity and the amount in controversy. (Dkt. 5 No. 1.) The Court’s subsequent denial of class action status did not divest it of subject matter 6 jurisdiction. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. 7 Workers Int’l Union v. Shell Oil Co., 602 F.3d 1087, 1092 (9th Cir. 2010). Further, the parties 8 have consented to the jurisdiction of a magistrate judge. (Dkt. Nos. 13, 14, 30, 33.) FACTUAL FINDINGS 9 10 United States District Court Northern District of California 11 A. The Parties Grubhub is an internet food ordering service that connects diners to local restaurants. The 12 company was founded in 2004 as an online platform where diners could order food from local 13 restaurants. Grubhub began offering food delivery in select markets in 2014. Customers order 14 food through Grubhub’s online platform and Grubhub transmits the orders to restaurants. The food 15 is then delivered either by a restaurant delivery person or a Grubhub driver. Diners may also pick 16 up their own meals ordered through Grubhub. 17 Grubhub operates in 1,200 markets in the United States. Of those markets, 250 are in 18 California and of those Grubhub offers its own delivery services in five. As of June 2016, there 19 were 4,000 Grubhub delivery drivers in California. Delivery is a growing part of Grubhub’s 20 business; indeed, it was aggressively growing its delivery business in 2015. By providing delivery 21 services, Grubhub increases the number of restaurants it can offer to diners on its online platform. 22 In the five California markets where Grubhub offers delivery services, the majority of Grubhub’s 23 diners have their meals delivered by the restaurants. For the remaining customers, Grubhub 24 delivers meals more than the customers pick up the food themselves. The percentage of Grubhub- 25 provided deliveries is growing. 26 Plaintiff Rael Lawson lives in Inglewood, California, a neighborhood in Los Angeles. At 27 all times relevant to this lawsuit, he was an aspiring actor, writer, producer and director. In 28 August 2015, Mr. Lawson completed an online application to make food deliveries for Grubhub 3 1 and submitted the required documents: a driver’s license, vehicle registration, and vehicle 2 insurance. Mr. Lawson performed food deliveries for Grubhub over a four month period: from 3 October 25, 2015 through February 14, 2016. Prior to performing Grubhub food deliveries, Mr. 4 Lawson worked for other so-called “gig economy” companies, including Lyft, Uber, Postmates, 5 and Caviar. He drove for these companies, including Grubhub, because the flexible scheduling 6 allowed him to pursue his acting career. Mr. Lawson continued to deliver food for Postmates and 7 Caviar during the four months he was delivering for Grubhub. 8 B. 1. 9 United States District Court Northern District of California The Initial Contract Mr. Lawson executed a “Delivery Service Provider Agreement” with Grubhub on August 10 11 The Grubhub Delivery Services Provider Contract 28, 2015. The Agreement includes the following terms, among others: • 12 Relationship of Parties: The “Primary Delivery Service Provider” (Mr. Lawson) is 13 engaged in the “independent business of providing delivery services.” (Trial Ex. 1 ¶ 14 2.1.) The parties intend the agreement to create the relationship of principal and 15 independent contractor, not employer and employee. (Trial Ex. 1 ¶ 7.1.) The driver 2 16 acknowledges that if at any time he believes his relationship with Grubhub is 17 something other than an independent contractor relationship, the driver will 18 immediately notify Grubhub of this view. (Trial Ex. 1 ¶ 7.2.) • 19 Performing Services for Others: The driver is not precluded from doing business 20 with others and Grubhub does not have the right to restrict the driver from being 21 concurrently or subsequently engaged in performing delivery services for other 22 companies, even those that compete with Grubhub. (Trial Ex. 1 ¶ 2.4.) • 23 Availability: There is no specific minimum period of time for which the driver must 24 make himself available. Each day the driver makes himself available is treated as a 25 separate contractual engagement. The driver has complete discretion to select the dates 26 he is available to perform the delivery services and has no obligation to make himself 27 2 28 While a delivery service provider could use a bicycle rather than a vehicle, because Mr. Lawson used a car for deliveries this Opinion will refer to the delivery services provider as the “driver.” 4 1 available on any particular date. However, once the driver agrees to an engagement, 2 the driver is contractually bound to fully perform the engagement on the specified date. 3 (Trial Ex. 1 ¶ 3.1.) 4 • Contractors: The driver may use contractors or subcontractors to perform the delivery 5 services. In such cases the service fee is still paid to the contracted driver who has the 6 sole responsibility of setting the terms of his payments to any contractors or 7 subcontractors. (Trial Ex. 1 ¶ 3.2.) 8 • Service Level Agreement: The driver agrees to comply with Appendix A, the “Service Level Agreement,” which requires that the driver: (1) download the necessary 10 tools to fulfill orders, (2) sign up for weekly blocks either through the Grubhub driver 11 United States District Court Northern District of California 9 app or other means, (3) provide a status update to a dispatcher that the driver is “on 12 call” when a delivery block starts, (4) not reject incoming orders or be otherwise 13 unavailable to receive incoming orders during any scheduled delivery block with 14 exceptions for “extenuating circumstances” if the driver timely communicates such 15 circumstances to a dispatcher, (5) provide status updates upon arrival at a restaurant, 16 after receiving the food, and leaving the restaurant for delivery, (6) communicate with 17 the care team or a dispatcher if there are diner issues, and (7) have no more than one 18 moving violation in 24 months and no involvement in any at fault accidents. Failure to 19 comply with this provision constitutes a material breach. (Trial Ex. 1 ¶ 3.3; Appendix 20 A Service Level Agreement.) 21 • Delivery Service Failure: If the driver fails to fully perform a delivery he is 22 contractually bound to perform, fails to follow order instructions, or fails to abide by 23 the Service Level Agreement, the driver forfeits the agreed upon service fee for the job 24 to the extent the driver is responsible for the failure. (Trial Ex. 1 ¶ 4.1.) 25 • Equipment: The driver must provide Grubhub a description of his vehicle (or 26 bicycle). (Trial Ex. 1 ¶ 5.1.) The driver is not required to purchase, lease, or rent any 27 equipment from Grubhub; however, the driver is required to use and maintain a 28 smartphone at his own expense and equipment sufficient to insulate food orders during 5 1 delivery. (Trial Ex. 1 ¶ 5.2.) The driver may (1) lease insulated delivery bags from 2 Grubhub in exchange for wearing Grubhub t-shirts and hats, (2) lease bags from 3 Grubhub for $5 per month, or (3) purchase two food bags, one pizza bag, and one 4 gelato bag. (Service Fees and Equipment Appendix.) The driver is also responsible 5 for all costs and expenses arising from his performance of the delivery services 6 including costs related to equipment. (Trial Ex. 1 ¶ 5.4.) 7 • Service Fees: Drivers are paid according to the Service Fees and Equipment Index which states that service fees consists of $4.25 per fulfilled delivery plus $0.50 per 9 mile between the restaurant and the diner. Drivers are entitled to bonuses if they are 10 available to receive orders for each scheduled block, worked at least 20 hours in one 11 United States District Court Northern District of California 8 week, and had an acceptance rate of offered deliveries in the “top 15th percentile” of 12 all eligible drivers in that particular market. Such bonuses are made at $2.50 per hour 13 of completed work that week, up to a maximum of $100. Drivers are guaranteed a 14 minimum average payment of $15 per hour, including gratuities, if they accept and 15 fulfill 75% of orders received and are available to receive incoming orders during the 16 entirety of each scheduled delivery block (with exceptions for “extenuating 17 circumstances”). Nothing in the agreement prevents the driver from negotiating a 18 different service fee for any given engagement; however, the service fee for subsequent 19 engagements reverts to the amounts set out in the appendix. (Trial Ex. 1 ¶ 8.1, Service 20 Fees and Equipment Appendix.) 21 • Term: The Agreement remains in effect for 60 days, after which it continues to 22 automatically renew for additional 60-day periods. (Trial Ex. 1 ¶ 13.1.) The parties 23 acknowledge the Agreement does not reflect an “uninterrupted service arrangement,” 24 as the Agreement guarantees the driver’s right to choose when to make himself 25 available and each engagement is treated as a separate service arrangement. (Trial Ex. 26 1 ¶ 13.2.) 27 28 • Termination Provision: The parties have a mutual right to terminate the Agreement. Each could do so immediately upon written notice to the breaching party, with such 6 1 notice identifying the breach. Or, each could do so without cause with 14 days prior 2 written notice. (Trial Ex. 1 ¶¶ 13.1.1, 13.1.2.) 3 2. The Amendment 4 The Agreement Mr. Lawson signed in August 2015 was amended by Grubhub on 5 December 5, 2015. Mr. Lawson agreed to the amendments in writing. Section 8.1, discussing 6 fees, was deleted in its entirety and replaced with language stating that drivers will be offered a 7 service fee for each proposed engagement and shall accept fee offers by email or through the app. 8 (Trial Ex. 2. at 2-3.) Drivers have the opportunity to accept or reject the fee offer. (Trial Ex. 2. at 9 3.) If the driver accepts the fee offer, then the driver agrees to perform the delivery services for that particular engagement. (Trial Ex. 2. at 3.) Further, the section entitled “Service Fees” in the 11 United States District Court Northern District of California 10 Service Fees and Equipment Index was deleted in its entirety. Only the “Equipment” section 12 remained and the title of the document changed to “Equipment Index.” (Trial Ex. 2. at 3.) The Service Level Agreement was also amended by removing the language that suggested 13 14 drivers had to sign up for weekly blocks, not reject orders, and receive incoming orders during any 15 scheduled delivery block with exceptions for “extenuating circumstances.” After the amendment, 16 the Agreement required drivers to be located within a reasonable distance of restaurants in the area 17 where the driver is contracted to work. (Trial Ex. 2 at 3.) 18 C. Mr. Lawson’s Work for Grubhub 19 1. Onboarding 20 Before Mr. Lawson began working as a Grubhub driver, Grubhub did not require Mr. 21 Lawson to attend any mandatory training or onboarding. Grubhub did provide Mr. Lawson with 22 certain training videos; however, Grubhub does not monitor whether drivers watch the videos. 23 After Mr. Lawson executed the Agreement, Mr. Lawson watched Grubhub online training videos 24 which provided instruction on how to use the Grubhub driver app, the proper etiquette with 25 restaurants and customers, and how drivers should be prompt with orders so customers receive 26 warm food. 27 28 When Mr. Lawson first contracted with Grubhub, Grubhub employed driver coordinators whose primary responsibility was driver recruitment. As part of the onboarding process, the 7 1 driver coordinators phone screened the delivery applicants to, among other things, ensure they had 2 a proper delivery vehicle. Grubhub’s phone screening process ended in late 2015. During this 3 period Grubhub also performed a background check on driver applicants, including Mr. Lawson. 4 The background checks were performed by a third party and then reviewed by Grubhub. 5 During the onboarding process Mr. Lawson learned the Grubhub uniform consisted of a 6 Grubhub shirt and hat; however, Mr. Lawson was not required to wear the uniform. He was also 7 not required to put a Grubhub sign on his car or use the Grubhub insulated food warming bag. 8 2. Scheduling 9 Although Mr. Lawson signed the Grubhub Agreement in August 2015, he did not actually begin making deliveries until two months later, in October 2015. This delay was not unusual; 11 United States District Court Northern District of California 10 approximately 40% of the individuals who sign up to deliver for Grubhub never perform any 12 Grubhub deliveries. During these intervening two months, Grubhub did not contact Mr. Lawson. 13 Nothing happened when Mr. Lawson did not sign up for a single block. 14 Once a week, Grubhub released a schedule of available shifts called “blocks” through an 15 online program called “When I Work.” Drivers selected their schedules by signing up for these 16 blocks on a weekly basis. Blocks were usually released on Sundays and were limited in 17 availability on a first-come-first-serve basis. 18 Mr. Lawson chose the blocks he wanted to work. If Mr. Lawson did not want to work, he 19 did not schedule himself. No one at Grubhub assigned Mr. Lawson blocks or instructed him to 20 sign up for blocks. 21 Each block was for a specific amount of time and drivers were required to register for an 22 entire block, not parts of it, if they chose to register for a block at all. A block generally lasted 23 from two to five hours and was oriented around mealtimes. Grubhub used the block system to 24 have some idea of driver supply at a given time so that Grubhub could meet the anticipated 25 demand for its restaurant partners. If a driver did not want to deliver during a block he signed up 26 for, he could drop it or swap it with another worker. Mr. Lawson never made a delivery for 27 Grubhub except during a scheduled block. 28 Mr. Lawson signed up for Grubhub blocks on 69 different days from October 2015 8 1 through February 2016, but he performed deliveries on only 59 of those days. He was 2 compensated for self-scheduled blocks totaling approximately 35 hours in November 2015; 105 in 3 December 2015; 60 in January 2016; and 43 for the first two weeks of February 2015. 4 Drivers Grubhub believed were performing especially well became eligible for “priority 5 scheduling.” Eligible drivers received the schedule of available blocks a day earlier than other 6 drivers, affording them a better chance to register for their first choice blocks. Priority drivers 7 could swap shifts only with other priority drivers. Grubhub bestowed Mr. Lawson with priority 8 scheduling on one occasion: for the pay period of November 30, 2015 to December 6, 2015. That 9 week, Mr. Lawson worked a total of 44.75 hours, the highest number of blocks and hours Mr. 10 Lawson worked during the four months he performed delivery services for Grubhub. United States District Court Northern District of California 11 3. Payment 12 During the period Mr. Lawson delivered for Grubhub, the Agreement provided that drivers 13 would receive a per-order-delivered payment plus tips and a nominal amount for mileage to the 14 customer’s home (or other specified delivery location) from the restaurant. Until December 2015, 15 if Mr. Lawson accepted 75% of the orders offered to him for delivery during his self-scheduled 16 block, Grubhub guaranteed him $15 per hour for that block. This was known as “true up” pay. 17 After December 2015, Grubhub reduced the true up to $11 per hour for completing 85% of the 18 deliveries offered during the block. Drivers had to be signed up for and working during a block to 19 qualify for true up pay; drivers that toggled into the app without being scheduled for a block did 20 not qualify for the guaranteed rate. Mr. Lawson’s pay statement showed how much he earned 21 based on the per-delivery-fee (including tips and mileage); if the amount he received per delivery 22 was less than the guaranteed hourly minimum true up rate (assuming he satisfied the 75% 23 acceptance rate), then his compensation was “trued up” to the minimum hourly guarantee. 24 Grubhub paid Mr. Lawson on a weekly basis by direct deposit. It nearly always paid Mr. 25 Lawson the hourly true up guarantee. On one occasion Mr. Lawson was paid per delivery rather 26 than the true up amount because the cumulative per delivery pay was greater than the true up 27 amount. On five days when he did not qualify for the true up, and the “per delivery fee” would 28 pay him below minimum wage, Mr. Lawson received the minimum wage of $9 an hour in Los 9 1 Angeles. Mr. Lawson was not reimbursed for expenses, although he incurred costs for gas and his 2 cell phone. 3 Sometimes a delivery would extend Mr. Lawson beyond the end of his block, or at least 4 Mr. Lawson would indicate through the app that he had completed the delivery outside his 5 scheduled block. To receive compensation beyond his scheduled block, Mr. Lawson would 6 contact Grubhub and report that his pay should be adjusted. On each occasion, Grubhub adjusted 7 his pay without any investigation or inquiry as to why or whether Mr. Lawson in fact made the 8 delivery after the end of his scheduled block. 9 Grubhub paid Mr. Lawson the guaranteed true up rate for the blocks he scheduled provided he toggled himself available at some point during the block. It paid him the full amount even 11 United States District Court Northern District of California 10 when he toggled available after his block had started. For example, Mr. Lawson toggled available 12 at least five minutes late for over half of the approximately 87 blocks he was scheduled to deliver 13 for Grubhub. Of those, he toggled available more than 15 minutes late 27 times, more than 30 14 minutes late 19 times, and more than two and half hours late 11 times. He toggled available more 15 than three hours late for eight of his 87 blocks. Even though Mr. Lawson was not available to 16 receive offers for the entire period of his self-scheduled block, for each of these blocks Grubhub 17 paid him the true up fee for the entire block. 18 19 20 4. Deliveries i. Geographic zones Grubhub released blocks for specific delivery zones. Drivers were allowed to choose 21 which zone they wanted to deliver in when they first contracted with Grubhub. When Mr. Lawson 22 began driving for Grubhub there were three delivery zones in the Los Angeles area. Mr. Lawson 23 chose the “Los Angeles-Metro” zone which was near his home. Grubhub later added a “South 24 Bay” zone and Mr. Lawson signed up for that zone at some point. At his request, however, 25 Grubhub reassigned him to the Los Angeles zone near his home. 26 Grubhub asked drivers to start each scheduled block in their zones and to stay near their 27 zones during their block. At times Grubhub monitored whether drivers, such as Mr. Lawson, were 28 in their zone at the beginning of their block. If the drivers were not in their zone, and, in response 10 1 to a Grubhub inquiry did not indicate that they intended to be in their zone to make deliveries, 2 Grubhub would remove the driver from that scheduled block; that is, the Grubhub app would not 3 send them any further delivery offers during that scheduled block. 4 5 ii. Delivery offers Mr. Lawson moved the toggle button on the Grubhub driver app to “available” when he began a block. Grubhub used a computer algorithm to offer deliveries to available drivers, which 7 could be overridden by operations specialists (previously called “driver dispatchers”). After the 8 Grubhub driver app offered Mr. Lawson a delivery, he could either accept or reject it by hitting the 9 appropriate “button” on the app. If a driver rejected an offered delivery, Grubhub did not toggle 10 the driver off the app or remove the driver from his scheduled block or otherwise kick the driver 11 United States District Court Northern District of California 6 off the system; instead, the algorithm offered the delivery to a different available driver. If a 12 driver was having difficulty completing an accepted delivery; for example the driver got a flat tire, 13 an operations specialist could override the algorithm and manually make an offer to another 14 driver. If there was more customer demand than available drivers, Grubhub could send a market- 15 wide message asking for more drivers. 16 Generally, once Mr. Lawson accepted an order he drove to the restaurant to pick it up. 17 Grubhub did not require that he take a particular route to the restaurant; nor did it dictate how 18 much time he had to get to the restaurant. It also did not control what he could do on his way to 19 the restaurant; that is, what stops, if any, he would make along the way. 20 Upon Mr. Lawson’s arrival at the restaurant, he was required to use the Grubhub driver 21 app to indicate that he had arrived. Sometimes the food order took longer than expected, in which 22 case Mr. Lawson would notify Grubhub, who instructed Mr. Lawson on what to do. Restaurants 23 had the ability to rate drivers, but in practice only did so infrequently. Once Mr. Lawson picked 24 up the correct order, he used the app to so indicate. 25 Mr. Lawson would then deliver the food order to the Grubhub customer’s residence or 26 other specified place of delivery. Mr. Lawson could use any route he chose, and Grubhub did not 27 specify the amount of time in which he had to complete the delivery. According to Grubhub’s 28 records, on several occasions Mr. Lawson did not complete the delivery, or at least did not 11 1 indicate on the app that he had completed the delivery, until nearly an hour after he had indicated 2 through the app that he had picked up the food order from the restaurant. Grubhub did not contact 3 Mr. Lawson on these occasions to discover what was taking so long. When customers had issues 4 with their food order, such as a missing item or cold food, Mr. Lawson instructed the customer to 5 call Grubhub’s customer care. 6 Grubhub did not require Mr. Lawson to carry any customer supplies with him, such as 7 condiments or napkins. Grubhub did, however, determine the delivery fee charged to the 8 customers ordering food though its platform; Mr. Lawson could not and did not negotiate with 9 customers about how much they paid for any delivery. iii. 10 United States District Court Northern District of California 11 Mr. Lawson’s Delivery Attire When making deliveries Mr. Lawson usually wore the Grubhub hat and shirt, but not 12 always. Grubhub did not monitor Mr. Lawson to ensure that he wore the uniform which he had 13 agreed to do in exchange for use of Grubhub’s insulated bags. iv. 14 Mr. Lawson’s Deliveries for Grubhub’s Competitors 15 Mr. Lawson also worked as a delivery driver for Postmates and Caviar, two of Grubhub’s 16 food delivery competitors, during the same period he worked for Grubhub. He often accessed the 17 Postmates and Caviar apps during his Grubhub blocks and sometimes made deliveries for 18 Postmates and Caviar while working a scheduled Grubhub block. For example, on January 29, 19 2016, Mr. Lawson scheduled himself for a 5:00 p.m. to 8:00 p.m. Grubhub block. During that 20 time period he performed a delivery for Postmates and was logged in to the Caviar app during the 21 entire Grubhub block. Mr. Lawson performed a delivery for Caviar or Postmates, and sometimes 22 more than one delivery, during 17 of the 87 Grubhub blocks that Mr. Lawson signed up for and 23 did not drop. v. 24 Mr. Lawson Performed his own Deliveries 25 Mr. Lawson never hired anyone to make his deliveries for him or help with his deliveries. 26 5. 27 When Mr. Lawson first began delivering for Grubhub, he would sometimes accept an offer 28 he did not intend to deliver to maintain his acceptance rate and eligibility for the true up minimum Mr. Lawson’s Gaming of the Grubhub Driver App 12 1 guarantee. He would then contact the Grubhub driver hotline and ask that the delivery be 2 reassigned; reassignment following acceptance did not affect his acceptance rate for purposes of 3 the true up. According to Mr. Lawson, “everybody did this.” But after Grubhub began counting 4 driver requested reassignments against the acceptance rate for purposes of the true up, Mr. Lawson 5 ceased this practice. Mr. Lawson then gamed the app by scheduling himself for a block and ensuring that he 6 7 received few, if any, delivery offers so that he would receive the true up minimum guarantee for 8 performing none or maybe one delivery during an entire block. He did so by (1) turning his 9 cellphone on airplane mode or otherwise making his cellphone “out of network,” (2) toggling “available” for his self-scheduled block well after the block began, and (3) reporting through the 11 United States District Court Northern District of California 10 app that he had completed a delivery after the end of his scheduled block. A few examples are set 12 forth below. • 13 November 26: Mr. Lawson made no deliveries during a four hour block, 6 p.m. to 10 p.m. 14 He was “out of network” for much of the block. He did receive one delivery offer which 15 he accepted, but Grubhub’s records do not show that he picked up the order or delivered it; 16 he may have asked that it be reassigned. Because his acceptance rate was 100% he 17 received the full true up amount of $60. • 18 December 31: Mr. Lawson’s four hour block began at 5:00 p.m., but he did not toggle 19 available until 8:15 p.m. He received and accepted an order shortly thereafter, at around 20 8:21 p.m. He picked up the order at 8:42 p.m., but did not record that he delivered the 21 order until 9:14 p.m. Even though he did not toggle available until three hours after his 22 block began, he was paid the full true up amount for a block of four hours and twenty 23 minutes and received $47.63. 3 • 24 January 8: Mr. Lawson scheduled himself for a four hour block, from 5 p.m. to 9 p.m. 25 Mr. Lawson did not toggle available until 8:20 p.m., and his block ended 40 minutes later. 26 Despite his unavailability for most of his block, Grubhub paid him the full $44 true up 27 28 3 By this date Grubhub had reduced the “true up” rate to $11 per hour. 13 amount for a four hour block. 1 2 • January 11: Mr. Lawson’s four hour block started at 5 p.m., but Mr. Lawson did not 3 toggle available until 7:57 p.m. He was offered two deliveries during the one hour of his 4 block he was available. The second delivery was offered to him at 8:54 p.m. He accepted 5 the offer and reported completing the delivery at 9:29 p.m. (He apparently never reported 6 picking up the delivery from the restaurant). Mr. Lawson then asked Grubhub to extend 7 his block an additional 30 minutes due to the delivery made after the end of his block; in 8 doing so, he did not mention that he had started his block nearly three hours late. Grubhub 9 paid him the true up guarantee for a 4.5 hour block. 10 • 5:00 p.m. and toggled unavailable at 5:01 p.m. and paid the full true up amount of $22. United States District Court Northern District of California 11 12 January 12: Mr. Lawson’s two hour block started at 3:00 p.m. He toggled available at • January 15: Mr. Lawson’s four hour block started at 5 p.m. but he did not toggle 13 available until 7:13 p.m. Grubhub paid him the full true up amount for the four hour 14 block. 15 • January 18: Mr. Lawson scheduled himself for a four hour block, from 5 p.m. to 9 p.m. 16 He did not toggle himself available until 8:05 p.m. and shortly thereafter was offered and 17 accepted a delivery. His cell phone then went “out of network,” and he is not recorded as 18 having picked up or completed the delivery. Grubhub paid him the true up amount for the 19 full four hour block. 20 • January 29: Mr. Lawson’s four hour block started at 5 p.m. but he did not toggle 21 available until 8:17 p.m. He was immediately offered a delivery which he accepted and 22 delivered at the end of his block. Grubhub paid him the true up amount for the full four 23 hour block. 24 • January 30: Mr. Lawson’s four hour block started at 5 p.m., but he did not toggle 25 available until 8:26 p.m. He performed zero deliveries. Grubhub paid him the full true up 26 amount for a four hour block. 27 28 • February 7: Mr. Lawson scheduled himself for a three hour block from 11:00 a.m. to 2:00 p.m. He did not toggle himself available until one minute before the end of the block 14 1 at 1:59 p.m. Grubhub paid him the true up amount for the full three hour block. 2 At trial, Mr. Lawson did not deny that he manipulated the driver app so that Grubhub 3 would pay him as if he had worked full blocks despite not being available to make deliveries 4 throughout those blocks; to the contrary, when asked whether he had learned how to game the 5 Grubhub driver app, Mr. Lawson testified that he did not remember or he did not know. 6 Q: Fourteen times you performed no or one delivery and you got paid; correct? 7 A: I don’t know the exact number, but it’s around that. 8 Q: And you learned how to do that by trial and error playing around with the app; isn’t that right? 9 A: I don’t remember. 11 United States District Court Northern District of California 10 Q: You don’t remember? 12 A: Again it looks like a lot of these are after the hourly rate cut. At that point I didn’t really care. 13 14 Q: So you figured out how to game the system and you didn’t care? 15 A: Like I said, I don’t really recall. 16 17 (Dkt. No. 206 at 152:4-15.) When asked under oath if he had intentionally reported that he had completed a delivery 18 long after the delivery had been completed and after the end of his block so that he could be paid 19 more money for not working Mr. Lawson again did not deny the conduct. 20 Q: Isn’t it true, Mr. Lawson, that you were holding deliveries and you would click the 21 button long after the block had ended, even though you had completed the delivery, 22 in order to get more money out of Grubhub? 23 A: I don’t remember that. 24 Q: But you can’t say it didn’t happen? 25 A: I don’t know. 26 Q: So you’re not denying it? 27 A: I can’t do anything. I really don’t know. 28 (Dkt. No. 208 at 70:4-12.) 15 1 6. The Termination of Mr. Lawson’s Grubhub Contract 2 On February 15, 2016, Grubhub terminated its Agreement with Mr. Lawson based on Mr. 3 Lawson’s material breach of its terms. It did so by sending Mr. Lawson an email stating “you 4 have not been available to receive orders and have not performed delivery services during a high 5 proportion of the delivery blocks that you have signed up for. As a result of this material breach 6 of Section 3.3 of your Delivery Service Provider Agreement (your “Agreement”), you are being 7 notified that Grubhub is terminating your Agreement, effective immediately, in accordance with 8 Section 13.1.1 of your Agreement.” (Trial Ex. 75.) Less than one month after Grubhub terminated its Agreement with Mr. Lawson, Postmates 9 terminated its delivery contract with Mr. Lawson. Postmates advised Mr. Lawson: “It has come 11 United States District Court Northern District of California 10 to our attention that you have been engaging in fraudulent activity on your Postmates account. 12 Specifically, on more than one occasion, you have accepted delivery requests for merchants that 13 are closed or about to close, waited 30 minutes or more without moving, then informed job 14 support the merchant was closed, and received a payout despite no effort on your part to complete 15 the delivery. As a result, Postmates is deactivating your account. From the date of this letter 16 forward we have terminated your participation in our service.” (Tr. Ex. 1430.) 17 D. Mr. Lawson’s Credibility Mr. Lawson’s claimed ignorance of his dishonest conduct is not credible. Mr. Lawson 18 19 would remember if after he filed this lawsuit against Grubhub he cheated Grubhub. If he had not 20 moved his smart phone to airplane mode, intentionally toggled available late, or deliberately 21 engaged in other conduct to get paid for doing nothing he would have denied doing so at trial. But 22 he did not. Other dishonest conduct during this lawsuit further supports the Court’s finding that Mr. 23 24 Lawson intentionally manipulated the app to get paid for not working. 4 During discovery he 25 4 26 27 28 For this reason, to the extent any of the Court’s findings contradict Mr. Lawson’s trial testimony, the Court did not find Mr. Lawson’s testimony credible. The same is true for T.J. O’ Shae’s testimony. While Ms. O’Shae was sincere in her testimony, the Court finds much of it not credible due to her limited first hand exposure to relevant facts. Ms. O’Shae worked only 16 shifts in the driver care unit before resigning from Grubhub on February 14, 2016. And she tendered her resignation after only four shifts. Further, much of what she testified to as “fact” was based on 16 1 produced a resume that falsely represents that he attended a Loyola Marymount University Master 2 of Fine Arts program from August 2012 to May 2015, and even lists a specific grade point 3 average; however, Mr. Lawson was only enrolled in the program for one year and did not 4 graduate. When confronted at trial with this misrepresentation, Mr. Lawson testified that he listed 5 all three years because he was “still involved in various activities” and he felt “still part of [the 6 Loyola Marymount] community.” (Dkt. No. 208 at 48:13-16.) This explanation is not credible. 7 He also tried to explain the misrepresentation by claiming that he had not updated the resume 8 since he had started the Master of Fine Arts program, apparently suggesting that he had written 9 those dates on the resume because at the time he had anticipated completing the program. However, other dates on the resume expose that this explanation, also given under oath, is false. 11 United States District Court Northern District of California 10 The resume states that Mr. Lawson’s most recent employment at “QED International” began in 12 June 2015; thus, Mr. Lawson must have updated the resume after he started the program in 2012 13 and his testimony that he had not was false. 14 Further, in April 2017, Mr. Lawson—using an alias (Ray Lawson) and a different email 15 address—applied to deliver for Grubhub. In his application he falsely represented that he had 16 never before driven for Grubhub. At trial he admitted that he had lied on the application. 17 18 LEGAL ANALYSIS 5 To find in favor of Mr. Lawson on his individual California Labor Code claims and his 19 PAGA claim, the Court must find that Mr. Lawson was a Grubhub employee rather than an 20 independent contractor. See Ayala v. Antelope Valley Newspapers, Inc., 59 Cal.4th 522, 530 21 (2014); Iskanian v. CLS Transportation Los Angeles, 59 Cal.4th 348, 380 (2014). Mr. Lawson’s 22 employment status is governed by the multi-factor test set forth in S.G. Borello & Sons, Inc. v. 23 Department of Industrial Relations, 48 Cal.3d 341 (1989). See Alexander v. FedEx Ground 24 25 26 27 28 assumptions she made after eavesdropping on one side of a conversation or just misremembered and was in fact demonstrably false. For example, although she never delivered for Grubhub, she testified that drivers had only 20 seconds to accept or reject a delivery offer on the driver app. Grubhub’s records, however, show the offers stayed available for two to three minutes before being withdrawn or “reaped.” 5 The Court’s legal analysis may contain findings of fact not included in the factual findings section. The Court intends all statements of fact to constitute a finding of fact regardless of what section of this Opinion they appear. 17 1 Package System, Inc., 765 F.3d 981, 988 (9th Cir. 2014); see also Linton v. DeSoto Cab Co., 15 2 Cal.App.5th 1208, 1219 (2017) (holding that the Borello test applies to wage and expense-related 3 employee issues, not just workers compensation). As Mr. Lawson performed delivery services for 4 Grubhub, Grubhub bears the burden of proving that Mr. Lawson was an independent contractor 5 rather than an employee. See Ruiz v. Affinity Logistics, Corp., 754 F.3d 1093, 1100 (9th Cir. 6 2014); Linton, 15 Cal.App.5th at 1221. “‘The principle test of an employment relationship is whether the person to whom service 7 8 is rendered has the right to control the manner and means of accomplishing the result desired.’” 9 Alexander, 765 F.3d at 988 (quoting Borello, 48 Cal.3d at 350); see also Ayala, 59 Cal.4th at 532 (“the hirer’s right to control the work is the foremost consideration in assessing whether a 11 United States District Court Northern District of California 10 common law employer-employee relationship exists”). Courts also consider the following 12 secondary factors: 13 (a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee. 14 15 16 17 18 19 Alexander, 765 F.3d at 989 (quoting Borello, 48 Cal.3d at 351); see also Linton, 15 Cal.App.5th at 20 1219 (holding that the Borello secondary factors derived from the Restatement of Agency apply). 21 A. Right-to-Control 22 1. The Manner and Means 23 Grubhub’s “right to control work details is the most important or most significant 24 consideration.” Ruiz, 754 F.3d at 1100 (quoting Borello, 48 Cal.3d at 350) (emphasis in Ruiz). 25 That is, its “right to control the manner and means of accomplishing the result desired.” 26 Alexander, 765 F.3d at 988 (quoting Borello, at 48 Cal.3d at 350). 27 Grubhub exercised little control over the details of Mr. Lawson’s work during the four 28 18 1 months he performed delivery services for Grubhub. Grubhub did not control how he made the 2 deliveries—whether by car, motorcycle, scooter or bicycle. Nor did it control the condition of the 3 mode of transportation Mr. Lawson chose. Grubhub never inspected or even saw a photograph of 4 Mr. Lawson’s vehicle. Grubhub did ensure that Mr. Lawson’s chosen vehicle was registered and 5 insured, and that he had a valid driver’s license. But given that he could not legally drive the car 6 without these conditions being satisfied, Grubhub’s oversight in this respect does not weigh in 7 favor of employee status. See Linton, 15 Cal.App.5th at 1223 (“A putative employer does not 8 exercise any degree of control merely by imposing requirements mandated by government 9 regulation”). 10 Grubhub also did not control Mr. Lawson’s appearance while he was making Grubhub United States District Court Northern District of California 11 deliveries. While Mr. Lawson could wear a Grubhub shirt and hat, he was not required to do so 12 and did not always do so. Mr. Lawson was not required to have any Grubhub signage on his car 13 and in fact did not have any such signage. Further, although he agreed to wear the shirt and hat in 14 exchange for Grubhub providing him with insulated bags to carry the food orders, Grubhub did 15 not supervise whether he or other drivers did in fact wear the hat and shirt; indeed, there is nothing 16 in the record that suggests that Grubhub even knew whether drivers that took the insulated bags in 17 exchange for wearing the shirt and hat in fact did so. Compare with Ruiz, 754 F.3d at 1101 18 (defendant exercised control of detail of drivers’ work by requiring them to wear uniforms and 19 prohibiting them from wearing earrings, displaying tattoos, or having certain facial hair); 20 Alexander, 765 F.3d at 989 (employer controlled “drivers’ clothing from their hats down to their 21 shoes and socks” and required drivers to be “‘clean shaven, hair neat and trimmed, [and] free of 22 body odor’”). 23 Grubhub did not require Mr. Lawson to undergo any particular training or orientation. He 24 was not provided with a script for how to interact with restaurants or customers. He was not told 25 what supplies, if any, he had to have with him, whether condiments, straws or extra napkins. No 26 Grubhub employee ever performed a ride along with Mr. Lawson; indeed, no Grubhub employee 27 ever met Mr. Lawson in person before this lawsuit. 28 Grubhub did not control who could be with Mr. Lawson in his vehicle, or even accompany 19 1 him into a restaurant to pick up an order or to a customer’s door to make a delivery. While 2 Grubhub did reserve the right to perform a background check on any worker to whom Mr. Lawson 3 subcontracted his deliveries, Mr. Lawson’s right to subcontract his deliveries was theoretical 4 rather than actual. Given the nature of the work, the pay, and how the app works, subcontracting 5 was not a realistic option. However, the fact remains that Grubhub had no control over whom, if 6 anyone, Mr. Lawson wanted to accompany him on his deliveries. Mr. Lawson, rather than Grubhub, controlled whether and when Mr. Lawson worked, and 7 8 for how long. He contracted to drive for Grubhub in August 2015, but he did not schedule himself 9 for a block until October 2015. During that intervening period Grubhub did not terminate his contract or even contact Mr. Lawson to inquire why he was not taking deliveries. Grubhub did not 11 United States District Court Northern District of California 10 require Mr. Lawson to work a minimum number of blocks nor was there a maximum number of 12 blocks; Mr. Lawson was not required to sign up for any particular number of blocks, or any blocks 13 at all. If Mr. Lawson did not want to perform any deliveries for a particular week or month 14 because he was busy with his acting career or simply preferred to do something else, Grubhub did 15 not require him to sign up for any blocks. In sum, Grubhub had no control over what blocks, if 16 any, Mr. Lawson chose to work. See Hennighan v. Insphere Ins. Sols., Inc., 38 F. Supp. 3d 1083, 17 1100 (N.D. Cal. 2014) (“An individual who determines his own hours and break times ‘on most 18 days’ exercises ‘meaningful discretion.’”) (citation omitted), aff’d, 650 F. App’x 500 (9th Cir. 19 2016). 20 Mr. Lawson could decide not to work a block he signed up for right up to the time the 21 block started. Mr. Lawson even had the right to reject any order offered during his scheduled 22 block; in other words, he had no obligation to perform any delivery offered to him by Grubhub 23 even though he had signed up to work a particular block. Indeed, the Grubhub driver app had a 24 reject button the entire time Mr. Lawson performed deliveries for Grubhub. 25 Before the December 5, 2015 amendment to the Agreement, if Mr. Lawson signed up for a 26 block, the Agreement stated that he should perform all deliveries offered to him during his block 27 unless he had “extenuating circumstances.” The Agreement nonetheless contemplated that he 28 would not accept all deliveries offered to him given that he would receive the true up guarantee by 20 1 accepting and delivering 75% of the delivery offers (excluding extenuating circumstances). And 2 he was never forced to accept a particular delivery offer during his scheduled blocks. Thus, at bottom, Mr. Lawson had complete control of his work schedule: Grubhub could 4 not make him work and could not count on him to work. Even when he signed up for a block he 5 could cancel his engagement right up to the block start. Grubhub’s right to terminate Mr. 6 Lawson’s Agreement for a material breach, for example, scheduling himself for blocks and then 7 not making himself available for deliveries without cancelling his commitment, is not inconsistent 8 with an independent contractor relationship. Even an independent contractor must perform the 9 work he contracted to perform. The right to terminate the Agreement in these circumstances is not 10 controlling the means and manner of how Mr. Lawson performed deliveries; it is merely the right 11 United States District Court Northern District of California 3 to terminate the agreement if one party does not do what he contracted to do. If the landscaper 12 Grubhub hired to maintain its headquarters never shows up when she says she will, Grubhub’s 13 right to cancel its contract with the landscaper does not transform the relationship into one of 14 employer/employee. Such a right is control over the result rather than control over the manner and 15 means of the work. See Millsap v. Fed. Express Corp., 227 Cal. App. 3d 425, 431 (1991) (“If 16 control may be exercised only as to the result of the work and not the means by which it is 17 accomplished, an independent contractor relationship is established”) (internal quotation marks 18 and citation omitted); see also Alexander, 765 F.3d at 990 (control over results in the delivery 19 context means the “timely and professional delivery of packages”). 20 Grubhub also did not control how and when Mr. Lawson delivered the restaurant orders he 21 chose to accept. The Agreement did not specify an amount of time in which a driver had to reach 22 a restaurant to pick up an order; nor did it specify how quickly the driver had to complete the 23 delivery. Mr. Lawson picked his own route; indeed, he could make as many stops as he desired 24 and even make a delivery for another company while delivering for Grubhub, and on many 25 occasions he made deliveries for Grubhub’s restaurant delivery competitors while working a 26 Grubhub scheduled block. While Grubhub might contact a driver to ask how long before a 27 delivery would be made in response to a customer inquiry, the Agreement did not require 28 deliveries be made within any set amount of time, and Grubhub never told Mr. Lawson a delivery 21 1 had to be made in a particular amount of time. While there is evidence that Grubhub terminated 2 its delivery contract with a couple of drivers for routinely taking well more than an hour to make 3 deliveries, such control is control over the result: “timely and professional delivery” of restaurant 4 meals. See Alexander, 765 F.3d at 990. 5 Further, if Mr. Lawson reported that he completed a delivery after the end of his scheduled 6 block, he requested that his pay be adjusted to reflect the longer hours. Grubhub modified his pay 7 accordingly without any investigation or supervision into whether Mr. Lawson made the delivery 8 when recorded or whether he could have completed the delivery in less time. This lack of 9 oversight further evidences Grubhub’s lack of control of the manner and means of Mr. Lawson’s 10 United States District Court Northern District of California 11 work. Grubhub also did not prepare performance evaluations of Mr. Lawson. While for a time 12 drivers whom Grubhub in its sole discretion determined were its top performers were offered 13 priority scheduling, failing to qualify as a top performer did not jeopardize Mr. Lawson’s contract 14 with Grubhub. No one at Grubhub was Mr. Lawson’s boss or supervisor. 15 Mr. Lawson’s gaming of the Grubhub driver app further illustrates how little control 16 Grubhub had over the details of Mr. Lawson’s work. For weeks, if not months, Mr. Lawson was 17 able to perform little to no deliveries and yet get compensated as if he had been available for entire 18 blocks—and sometimes even past his scheduled blocks—because Grubhub was not supervising 19 his performance. Mr. Lawson’s dishonesty eventually led to Grubhub’s termination of his 20 Agreement for cause, but this does not mean that Grubhub had the right to control the details of 21 his work. As explained above, a hirer must have the right to terminate an agreement with an 22 independent contractor if the contractor is not performing the work he contracted to do and is in 23 fact cheating the hirer. 24 Grubhub did control some aspects of Mr. Lawson’s work. Grubhub determined the rates 25 Mr. Lawson would be paid and the fee customers would pay for delivery services. While the 26 Agreement states that a driver may negotiate his own rate, this right is hypothetical rather than 27 real. The Court finds that Mr. Lawson could not negotiate his pay in any meaningful way and 28 therefore this fact weighs in favor of an employment relationship. 22 1 Grubhub also determined which blocks to make available for driver selection and the 2 length of each block. By providing a schedule of available blocks, however, Grubhub did not 3 control the manner or means of Mr. Lawson’s work. Grubhub did not make Mr. Lawson work a 4 certain schedule or control Mr. Lawson’s hours – there was no minimum or maximum number of 5 blocks a driver could or must sign up for. 6 Grubhub determined the geographic boundaries of the delivery zones and required Mr. Lawson and other drivers to stay in or around their delivery zone during their scheduled blocks. 8 But this control was also not over the manner and means of Mr. Lawson’s work; it was instead to 9 control the result of the work, that is, to ensure that diners received their meals in a timely fashion. 10 See Alexander, 765 F.3d at 990. And, in any event, Mr. Lawson decided in what delivery zone he 11 United States District Court Northern District of California 7 wanted to work and whether on any given day for any available block he wanted to work for 12 Grubhub at all. 13 2. Termination at Will 14 The fact that arguably most suggests Grubhub had a right to control Mr. Lawson’s work is 15 its right to terminate the Agreement at will, albeit with 14 days’ notice. See Ayala, 59 Cal. 4th at 16 531 (“Perhaps the strongest evidence of the right to control is whether the hirer can discharge the 17 worker without cause, because ‘[t]he power of the principal to terminate the services of the agent 18 gives him the means of controlling the agent’s activities.”); Borello, 48 Cal. 3d at 350 (“Strong 19 evidence in support of an employment relationship is the right to discharge, at will, without 20 cause.”); Alexander, 765 F.3d at 988 (“The right to terminate at will, without cause, is strong 21 support of an employment relationship.”); Narayan v. EGL, Inc., 616 F.3d 895, 900 (9th Cir. 22 2010) (stating that under California law the right to discharge at will is the most important factor). 23 Grubhub contends that this factor does not weigh in favor of an employment relationship 24 because the at-will termination right was mutual: Grubhub could terminate the Agreement with 14 25 days’ notice and Mr. Lawson could do so the same. In fact, since Mr. Lawson was not required to 26 sign up for any blocks at all, he could in effect terminate the Agreement at any time without notice 27 by simply not signing up for any blocks. As support for its position, Grubhub cites Jones v. Royal 28 Admin. Servs., Inc., 866 F.3d 1100 (9th Cir. 2017). There, in a case involving vicarious liability 23 1 under a federal statute, the Ninth Circuit held that a mutual termination provision with 30 days’ 2 notice and a one-year term was consistent with an independent contractor relationship because 3 “[t]he designated impermanency of the relationship supports a finding of independent contractor 4 status.” Id. at 1107. Jones, however, was not addressing the right-to-control under California’s 5 Borello test and is thus inapposite. 6 The Court is also not persuaded that Beaumont-Jacques v. Farmers Group, Inc., 217 Cal. 7 App. 4th 1138 (2013) dictates that a mutual at-will termination provision weighs against an 8 employer/employee relationship. The Beaumont-Jacques court appeared influenced by the fact 9 that the cases suggesting otherwise were in the workers compensation area, a distinction that is no longer viable. See Linton, 15 Cal. App. 5th at 1219. In any event, in the end, the court decided 11 United States District Court Northern District of California 10 that even if the at-will termination provision was consistent with an employment relationship, 12 weighing all the factors established that the plaintiff was an independent contractor. Id. at 1147; 13 see also Hennighan v. Insphere Ins. Sols., Inc., 38 F. Supp. 3d 1083, 1105 (N.D. Cal. 2014) (citing 14 Beaumont-Jacques for the proposition that a mutual termination clause evidences an independent- 15 contractor relationship) aff’d, 650 F. App’x 500 (9th Cir. 2016). Further, Beaumont-Jacques was 16 decided before the California Supreme Court’s decision in Ayala. 17 The question, then, is how much Grubhub’s right to terminate at will on 14 days’ notice 18 gave it control over the manner and means of Mr. Lawson’s work. In some circumstances, that 19 termination right will be powerful. In Estrada v. FedEx Ground Package System, Inc., 154 Cal. 20 App. 4th 1 (2007), for example, the drivers had to make the considerable investment of buying 21 FedEx approved trucks and scanners. The drivers worked full time. FedEx supervised the drivers 22 and could control their routes and schedules and thus their income. And the drivers worked 23 exclusively for FedEx. Id. at 12. Under these circumstances, FedEx exercised tremendous control 24 through its right to terminate at will (or, in that case, not renew) given that the driver would have 25 made this large financial and time commitment. The driver would need to protect his investment 26 and livelihood and thus would accede to whatever FedEx wanted to avoid termination. 27 For Mr. Lawson, not so much. He waited two months after he contracted with Grubhub to 28 even start delivering meals. He delivered for other companies during the four months he delivered 24 1 for Grubhub, sometimes at the same time he was on block for Grubhub. He worked only when he 2 wanted so that he could pursue his acting career, and generally less than 20 hours a week. He did 3 not have to purchase any special equipment or tools to perform the work; all he needed was a cell 4 phone and a mode of transportation which he already had. He did not even have to invest in a 5 uniform or insulated bags. In these circumstances, Grubhub’s right to terminate at will is neutral 6 in the right to control analysis. *** 7 8 The Court thus concludes that the right to control factor weighs strongly in favor of finding that Mr. Lawson was an independent contractor. The cases in which courts have found that 10 delivery drivers were employees based on the right to control the driver’s work all evidenced 11 United States District Court Northern District of California 9 significantly more hirer control. In Alexander, for example, FedEx controlled the drivers’ 12 appearance, route, schedule, and even what truck they could drive. Grubhub controls none of 13 those details. Ruiz was similar to Alexander. Affinity, the putative employer, controlled the 14 drivers’ schedules, routes, equipment, including delivery vehicles, and even “every exquisite 15 detail” of the drivers’ appearance. 754 F.3d at 1101-02. Similarly, in Flores v. Velocity Express, 16 LLC, 250 F.Supp.3d 468 (N.D. Cal. 2017), Velocity, the putative employer, designed particular 17 delivery routes, determined what the routes would pay, and then hired drivers for particular routes. 18 Id. at 472. It required the drivers to wear a Velocity uniform and badge, and to display certain 19 signage. The drivers had to report to Velocity’s warehouse each day, and Velocity dictated what 20 packages the drivers delivered and by what time. And the drivers were required to follow 21 Velocity’s standard operating procedures. Id. at 472-73. Grubhub controlled none of those details 22 as to Mr. Lawson’s work. 23 In Villapando v. Excel Direct Inc., 2015 WL 5179486 (N.D. Cal. Sep. 3, 2015), the 24 putative employer determined what deliveries the driver had to make and in what time window, 25 required drivers to attend a daily morning meeting, to work five to six days a week for between 10 26 and 12 hours per day, and the drivers had to speak to a manager before taking a day off. The 27 employer also controlled the drivers’ appearance as well as that of their vehicles. Id. at *46; see 28 also Garcia v. Season Logix, Inc., 238 Cal. App. 4th 1476, 1485 (2015) (the putative employer 25 1 required the plaintiffs to report to a warehouse for a meeting every morning, receive permission to 2 take time off, determined what deliveries the driver would make; drivers could only use their truck 3 for work for the putative employer, and they were not allowed to make deliveries for others). 4 Again, Grubhub controlled none of those manner or means of Mr. Lawson’s work. 5 B. The Borello Secondary Factors 6 That the right to control the manner and means of Mr. Lawson’s work weighs in favor of 7 finding that Grubhub properly classified Mr. Lawson as an independent contractor is not the end 8 of the Court’s inquiry; the Court must also consider the Borello secondary factors. 9 1. Distinct Occupation or Business This factor weighs in favor of an employment rather than independent contractor 11 United States District Court Northern District of California 10 relationship. Mr. Lawson was not engaged in a distinct occupation or business. He did not run a 12 delivery business of which Grubhub was simply one client. See Jones, 866 F.3d at 1107 (when a 13 worker “ha[s] many different clients and offer[s] [the same] services to others during the same 14 period,” those facts are consistent with an independent contractor relationship) (internal quotation 15 marks and citation omitted). He did not get to decide how much Grubhub paid him or how much 16 Grubhub’s customers paid for his delivery services. Instead, Mr. Lawson worked multiple low- 17 wage jobs in addition to his nascent acting career. 18 Mr. Lawson’s identification of himself on his tax return as “self-employed” does not 19 persuade the Court otherwise. Given that Grubhub and the other “gig economy” companies for 20 whom he performed services classified him as an independent contractor that is what he had to put 21 on his return. 22 23 2. Whether the Work is Performed Under the Principal’s Direction or Supervision 24 This factor is similar to the right-to-control work details analysis, thus it favors an 25 independent contractor finding. See Alexander, 765 F.3d at 995 (this factor slightly favored the 26 drivers because FedEx closely supervised their work through various methods); Ruiz, 754 F.3d at 27 1104 (same). Mr. Lawson did not have a supervisor. He did not report to anyone at Grubhub; 28 indeed, he never met in person with anyone at Grubhub. Grubhub did not supervise Mr. Lawson’s 26 1 work in nearly any respect other than eventually terminating him after he did not perform 2 deliveries when he said he would but was nonetheless paid as if he had. 3 3. 4 This factor favors an employment relationship as anyone with a means of delivery can 5 contract to deliver for Grubhub—no special skills are needed. See Alexander, 765 F.3d at 995 6 (holding that this factor favored an employment finding as the “FedEx drivers need no experience 7 to get the job in the first place and [the] only required skill is the ability to drive.”) (internal 8 quotation marks and citation omitted). 9 10 4. The Skill Required in the Occupation The Provision of Tools and Equipment This factor favors an independent contractor finding as Mr. Lawson provided his own United States District Court Northern District of California 11 mode of transportation, his own smart phone, and could even provide his own insulated food bags. 12 Indeed, Grubhub does not provide, finance nor require any specific equipment or tools. Compare 13 with Alexander, 765 F.3d at 995 (finding that this factor slightly favored FedEx even though 14 FedEx was involved in the truck purchasing process, providing funds and recommending 15 vendors); Linton, 15 Cal. App. 5th at 1229 (this factor favored the plaintiff taxi driver where the 16 defendant provided the cab and tools to collect the fares). 17 5. Length of Time for Performance of Services 18 This factor favors an independent contractor finding. Mr. Lawson made deliveries for 19 Grubhub for four months and only on approximately half the days during those months, most days 20 for blocks of four hours or less. The Agreement had a 60-day term, and while it automatically 21 renewed, Mr. Lawson was free to stop making deliveries at any time. Further, the Agreement 22 itself classified each block as a separate contractual engagement and explicitly stated that it was 23 not an uninterrupted service arrangement. While such classification was designed to strengthen 24 Grubhub’s independent contractor argument and thus is not overly persuasive, it is evidence that 25 Grubhub did not count on its relationship with its drivers being permanent. This lack of 26 permanence is reflected in the arrangement’s design; Mr. Lawson could sign up for blocks when 27 he wanted and not sign up when he did not want to deliver, without any penalty of any kind. 28 Grubhub had no expectation that Mr. Lawson would register for any particular block on any given 27 1 day. And there is nothing in the record that suggests Mr. Lawson’s short-lived engagement, 2 although involuntarily terminated, was unique in its minimal length. 3 6. The Method of Payment 4 This factor weighs slightly in favor of an employment relationship. Grubhub insists that this factor favors an independent contractor relationship because it paid Mr. Lawson per delivery. 6 But while in theory it did so, in practice it paid him by the hour. Specifically, provided he 7 accepted and delivered at least 75% (and later 85%) of the deliveries offered to him during a 8 scheduled block, Grubhub paid him a minimum hourly rate. Only one time during the four 9 months Mr. Lawson delivered for Grubhub was Mr. Lawson paid per delivery. This may have 10 occurred, in part, because due to his fraud Mr. Lawson was offered (and therefore made) few 11 United States District Court Northern District of California 5 deliveries and thus the per delivery compensation for him was never greater than the true up. 12 As Grubhub emphasizes, however, its implementation of the true up guaranteed minimum 13 actually illustrates its lack of control over drivers such as Mr. Lawson. Grubhub provided the 14 guaranteed minimum to incentivize Mr. Lawson and other contracted drivers to deliver because it 15 did not have the right to require Mr. Lawson to make any particular delivery or any deliveries at 16 any given time or ever. An employer, on the other hand, could require an employee to perform all 17 deliveries during an assigned shift. 18 Nonetheless, this factor still weighs slightly in favor of an employment relationship 19 because on all but one occasion when Mr. Lawson did not satisfy the delivery percentage for the 20 true up, Grubhub paid him minimum wage rather than what he would have been entitled to on a 21 fee-per-delivery basis. While Grubhub no doubt paid Mr. Lawson (and presumably) other drivers 22 the minimum wage as a hedge against a possible subsequent court ruling that the drivers are 23 employees, that excuse does not mean this factor favors Grubhub. Grubhub, in practice, paid Mr. 24 Lawson as an hourly employee. 25 7. Whether the Work is Part of Grubhub’s Regular Business 26 This factor favors an employment relationship. Grubhub is an internet restaurant ordering 27 platform that connects diners with participating restaurants. Diners can pick up their orders, have 28 them delivered by those restaurants that offer delivery, or, in some Grubhub markets, have 28 1 Grubhub deliver the food. While Grubhub did not offer any food delivery for 10 years, at the time 2 Mr. Lawson drove for Grubhub food delivery was part of Grubhub’s regular business in Los 3 Angeles; indeed, more diners had Grubhub deliver their food than picked it up themselves. While 4 food delivery is not Grubhub’s only or primary business (as was package delivery in the FedEx or 5 courier cases, see, e.g., Alexander, 765 F.3d at 996), it is a regular part of its business in Los 6 Angeles. Indeed, offering delivery services is key to Grubhub’s continued growth in urban 7 markets such as Los Angeles. 8 The cases Grubhub cites illustrate why this factor favors an employee finding. In Futrell v. Payday Cal., Inc., 190 Cal. App. 4th 1419 (2010), the plaintiff was hired to provide traffic and 10 crowd control by a company that produces commercials. The plaintiff argued that the company 11 United States District Court Northern District of California 9 hired by the commercial producer to provide payroll services was his employer. The court held 12 that traffic and crowd control was not part of the payroll company’s regular business; the payroll 13 company had no control over what the workers for whom it was providing payroll services do and 14 no expertise in the area. Here, in contrast, Grubhub deliberately entered the food delivery business 15 in certain urban markets. It developed an entire mobile app and algorithm and created entire 16 company departments to facilitate Grubhub’s delivery services. The payroll company, in contrast, 17 did not provide traffic and crowd control services. Similarly, in Lara v. Workers Comp. Appeals 18 Bd., 182 Cal. App. 4th 393 (2010), the restaurant that hired the gardener to trim the bushes was not 19 in the gardening business. Grubhub, in contrast, is in the business of online restaurant ordering 20 and, in the Los Angeles market, of also providing food delivery for certain restaurants. Just 21 because it is not the majority of its business does not mean it is not a regular part of its business in 22 those markets where Grubhub offers delivery service. 23 8. The Parties’ Intent 24 The parties’ intent is neutral in the Court’s analysis. Grubhub identifies the Agreement as 25 strong evidence of the parties’ intent to create an independent contractor relationship. The 26 Agreement expressly states that Mr. Lawson is an independent contractor, he acknowledges that 27 he is, and he promises that he will advise Grubhub if he changes his mind. But the label placed by 28 the parties on their relationship is not dispositive. See Alexander, 765 F.3d at 997. In the 29 1 circumstances here—where the hirer unilaterally determines the contract’s terms for a low wage, 2 low-skilled job—the parties’ label warrants little weight. See Linton, 15 Cal. App. 5th at 1222. 3 Mr. Lawson had to check the box stating that he understood he was an independent contractor if 4 he wanted to drive for Grubhub; Grubhub offers no evidence that it would have hired him 5 regardless. Grubhub also makes much of the evidence that Mr. Lawson contacted Plaintiff’s counsel 6 7 regarding a lawsuit before he ever joined Grubhub. But even if he signed up with Grubhub 8 believing that he was improperly classified (as he alleged in a complaint shortly thereafter), that 9 just means he did not intend to create an independent contractor relationship. 10 C. The Upshot United States District Court Northern District of California 11 The Borello factors “cannot be applied mechanically as separate tests; they are intertwined 12 and their weight depends often on particular combinations.” Alexander, 765 F.3d at 989 (internal 13 quotation marks and citation omitted). Here, some secondary factors favor an employee/employer 14 relationship: namely, Mr. Lawson’s delivery work was part of Grubhub’s regular business in Los 15 Angeles; the work was low-skilled; Mr. Lawson was not engaged in a distinct delivery business of 16 which Grubhub was just one client; and, slightly less, Grubhub’s method of payment. The other 17 factors, however, favor a finding that Mr. Lawson was an independent contractor. See Varisco, 18 166 Cal.App.4th at 1106 (explaining that because some factors suggest an employment 19 relationship does not means that such a relationship necessarily exists). Of primary significance, 20 Grubhub did not control the manner or means of Mr. Lawson’s work, including whether he 21 worked at all or for how long or how often, or even whether he performed deliveries for 22 Grubhub’s competitors at the same time he had agreed to deliver for Grubhub. Grubhub also did 23 not provide Mr. Lawson with any of the tools for his work (other than a downloadable mobile app) 24 and neither Grubhub nor Mr. Lawson contemplated the work to be long term or regular, but rather 25 episodic at Mr. Lawson’s sole convenience. And while Grubhub had the right to terminate the 26 Agreement at will upon 14 days’ notice, under the specific circumstances of this case, this right 27 did not allow Grubhub to exert control over Mr. Lawson’s work. After considering all the facts, 28 and the caselaw regarding the status of delivery drivers, the Court finds that all the factors 30 1 weighed and considered as a whole establish that Mr. Lawson was an independent contractor and 2 not an employee. 3 JKH Enterprises, 142 Cal. App. 4th 1046, which has facts similar to those the Court has found here, does not persuade the Court otherwise. There the putative employer provided courier 5 services to Bay Area businesses such as law firms and title companies. The couriers picked up 6 delivery items from regular customers and delivered them to the locations requested by the 7 customers. The couriers regularly serviced the same route and were paid a negotiated hourly rate 8 based on the particular route. Special drivers performed “special deliveries” requested by 9 customers on a particular day. Each day the special driver called JKH to advise whether the driver 10 wished to perform deliveries that day; if so, JKH provided the pickup and delivery information for 11 United States District Court Northern District of California 4 the special deliveries. The special drivers, however, could decline to perform any particular 12 delivery and were not required to work at all or on any particular schedule and they were paid 13 based on deliveries performed. Couriers and special drivers used their own vehicles to make 14 deliveries, did not wear uniforms or other JKH markings, and could perform delivery services for 15 other companies. If not enough drivers were available to work any particular day, JKH’s owner or 16 his family members performed the needed deliveries. Id. at 1050-52. 17 Upon a petition from some of the couriers, the California Department of Industrial 18 Relations found that the couriers who provide the actual delivery services on JKH’s behalf were 19 its employees rather than independent contractors and thus JKH failed to procure workers 20 compensation insurance on their behalf. Id. at 1049. JKH petitioned for administrative 21 mandamus. The appellate court concluded “[b]ased on the administrative record and the 22 deferential standard of review” that JKH had not demonstrated that the Department had abused its 23 discretion. Id. 24 JKH is distinguishable. First, although the drivers to some extent set their own schedule, 25 most of them worked regular routes and thus regular schedules. And, they worked regularly 26 enough that if a driver decided not to work on a particular day, JKH’s owner could fulfill its 27 delivery needs by delivering himself or having one of his family members deliver the packages. 28 Thus, substantial evidence supported the Department’s decision that JKH had all “necessary” 31 1 control. Here, in contrast, Grubhub has to create delivery blocks with bonuses and other 2 incentives to encourage drivers to make deliveries because it does not have all necessary control of 3 the drivers’ work; in particular, it does not have control of when and whether they work. Mr. 4 Lawson did not have a regular route, regular schedule or regular customers. Grubhub’s model is 5 different: there are no regular delivery drivers. 6 Second, JKH had previously classified the drivers as employees when using the identical 7 work structure. JKH only changed the drivers’ classification to independent contractors after JKH 8 was penalized for failing to provide workers compensation insurance; in other words, the 9 Department found that JKH’s classification was an intentional subterfuge. Grubhub never 10 United States District Court Northern District of California 11 classified the California drivers as employees. Third, many of JKH’s drivers not only drove regularly for JKH, but had done so for at least 12 two years. The facts create an impression of a small group of delivery drivers that JKH could 13 regularly count on for deliveries. Not so here. 14 Finally, the factor of over-riding importance to the Department was that providing 15 deliveries was JKH’s only business—the drivers were not only critical to the business they were 16 the business. It appears from the appellate court’s decision that in the Department’s view this 17 factor overrode JKH’s lack of control of the manner and means of the drivers’ work. Here, in 18 contrast, while delivery services are a regular part of Grubhub’s Los Angeles business, it is not 19 Grubhub’s only or even primary service. Grubhub could exist without offering delivery services; 20 indeed, for nearly a decade it did so, and even when Mr. Lawson delivered for Grubhub delivery 21 was only offered in a few markets. 22 The drivers in Air Couriers Intern. v. Employment Development Dept., 150 Cal. App. 4th 23 923 (2007), as Mr. Lawson, were also not required to accept every job, were not penalized for 24 rejecting a delivery, and were able to make deliveries for other companies. Further, drivers were 25 paid by the job, used their own vehicles and were not required to wear a uniform. The trial court, 26 and then the appellate court, found substantial evidence supported the Employment Development 27 Department’s decision that the drivers were employees. The Air Couriers drivers, however, 28 worked a regular schedule and thus the trial court found that the putative employer controlled the 32 1 hours the drivers worked. Id. at 937. Not so here. Further, many of the drivers delivered for the 2 putative employer for years. Id. at 938. Again, not so here. And, as with JKH, the delivery 3 service was the putative employer’s only business; without the drivers there was no business. 4 Again, not so here. CONCLUSION 5 6 Under California law whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition. If Mr. Lawson is an employee, he 8 has rights to minimum wage, overtime, expense reimbursement and workers compensation 9 benefits. If he is not, he gets none. With the advent of the gig economy, and the creation of a low 10 wage workforce performing low skill but highly flexible episodic jobs, the legislature may want to 11 United States District Court Northern District of California 7 address this stark dichotomy. In the meantime the Court must answer the question one way or the 12 other. Based on what the Court observed at trial and the facts found, and after applying the 13 Borello test, the Court finds that during the four months Mr. Lawson performed delivery services 14 for Grubhub he was an independent contractor. Since he was not an employee, he cannot prevail 15 on his individual Labor Code or PAGA claims. Accordingly, judgment must be entered in favor 16 of Grubhub and against Mr. Lawson. 17 18 19 IT IS SO ORDERED. Dated: February 8, 2018 20 JACQUELINE SCOTT CORLEY United States Magistrate Judge 21 22 23 24 25 26 27 28 33

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