Leiden Law Blog

Employment and independent contractor relationships in the ‘gig economy’

Posted on by Cees de Groot in Private Law
Employment and independent contractor relationships in the ‘gig economy’

The word ‘gig’ refers to work that is done for a defined amount of time, or for performing a defined task. In its most common usage, it refers to a musician or a group of musicians who give a one-time performance for an audience. In the ‘gig economy’, many workers have no employment contracts, but are ‘independent contractors’ who are paid per piece of work that they perform. The ‘gig economy’ is also referred to as the ‘collaborative economy’ or the ‘sharing economy’. With the advent of work being distributed through electronic platforms, for instance by smartphone applications, another phrase for the ‘gig economy’ is the ‘platform economy’. Smartphone applications not only make it possible to distribute work, but also make it possible for the platform to electronically monitor the way in which the work is being performed closely. A phrase that has come up in this respect is ‘algorithmic management’.

Grubhub, Inc. was founded in 2004. It operated an online platform that offered the possibility of ordering food from local restaurants. Through Grubhub’s online platform, customers could order food from local restaurants that they could pick up themselves, or have delivered by restaurant personnel or a Grubhub driver. Raef Lawson worked as a Grubhub driver from 25 October 2015 through 14 February 2016. He applied for this position online and submitted, as required documents, his driving license, car registration and car insurance. During his short tenure, Raef Lawson worked time blocks of 59 days, and worked around 35 hours in November 2015, 105 hours in December 2015, 60 hours in January 2016 and 43 hours in February 2016.

The relationship between Grubhub, Inc. and Grubhub drivers was laid down in a ‘Delivery Service Provider Agreement’. Drivers had complete freedom to make themselves available for performing delivery services. However, when signing up for a time block, drivers were not allowed to refuse incoming orders. To keep the food that customers had ordered warm, Grubhub drivers were required either to procure insulation equipment themselves, or purchase or lease insulation bags from Gruhub. When drivers leased insulation bags, they could do so for $5 per month or agree to wear Grubhub t-shirts and hats. Through later amendments to the agreement, many of these provisions were deleted, instead requiring that drivers reside within a reasonable distance of the restaurants in their working area.

The case between Raef Lawson and Grubhub, Inc. originally started in a California state court. For several reasons, the case was transferred to the U.S. District Court for the Northern District of California (San Francisco). The District Court decided the case under California law, dealing with the ‘critical question’ of whether Raef Lawson ‘was an employee or an independent contractor’. The Court concluded that Raef Lawson was an independent contractor: ‘at bottom, Mr. Lawson had complete control of his work schedule: Grubhub could not make him work and could not count on him to work’. The Court concluded its reasoning with the following, maybe disturbing or at least thought provoking, consideration:

‘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 has rights to minimum wage, overtime, expense reimbursement and workers compensation benefits. If he is not, he gets none. With the advent of the gig economy, and the creation of a low wage workforce performing low skill but highly flexible episodic jobs, the legislature may want to address this stark dichotomy. In the meantime the Court must answer the question one way or the other’.

The judgment of the U.S. District Court for the Northern District of California (San Francisco) of 8 February 2018 (Jacqueline Scott Corley, United States Magistrate Judge) in the case of Raef Lawson v. Grubhub, Inc., et al. (Case No.15-cv-05128-JSC) can be found at: www.courthousenews.com.

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