GrubHub Wins Important Driver Misclassification Case

Many emerging companies in the “gig” economy have been anxiously watching the independent contractor/employee cases regarding delivery services for several years.  In February of 2018, in a much-anticipated decision, a Federal Judge in San Francisco ruled that GrubHub properly classified a delivery driver as an independent contractor.  This ruling is an important win on the heavily challenged issue of employee verses contractor in the emerging on-demand economy.

Background

The plaintiff, Raef Lawson (Lawson v. GrubHub), claimed wage and hour violations, unpaid overtime and failure to reimburse expenses on the theory that he should have been employed by GrubHub and classified as an hourly driver. Lawson had entered into an independent contractor agreement with Grub Hub.  Lawson had only worked for GrubHub during a four-month period before Grub Hub removed him from platform due to “terms of service” violations.

A central theory, common in the defense of most gig economy cases, is that the software company merely provides a platform and creates a virtual market where subscribers on the demand side (customers) engage the services of subscribers on the supply side (independent contractors) and refrains from the direction or control the activities of workers who provide services.

California Contractor Test

The Judge reviewed the case under current California law (S.G.Borello & Sons v the Department of Industrial Relations).  The Judge ruled that the foremost consideration in determining Lawson’s classification related to the level of GrubHub’s control over “the manner and means of accomplishing the desired result”.  This classic “control analysis” relates to how much control the company exerts over the specifics of the contractor’s activities such as the exact pickup time and the route, as opposed to simply looking to the “result”, in this case, the ultimate delivery of food.

The Judge concluded that GrubHub did not control the details of the delivery driver’s work, such as hours, exact timing of deliveries and the route taken.  In all these cases, the court must balance factors in order to make a contractor v employee determination.

On the other side of the equation, the Judge found several factors that tipped the scales in favor of an employee classification.  These factors included the hourly rate of pay, the low-skilled nature of the work involved, and the fact that the work performed was an integral part of GrubHub’s core business.  Some factors were specific to the case.  For example, the Judge viewed Lawson’s dishonest conduct in manipulating GrubHub’s drivers’ app to receive additional pay for deliveries which he did not make, as important in the denial of Lawson’s claim.

Significance

This GrubHub case is the first in a series of cases yet to be decided and which could easily yield different results.  Clearly the fact that the plaintiff engaged in misconduct did not help his cause in this case.  Although not identified in writing, the court may have considered the astronomical growth of this sector of the current economy in which the economics only work under an independent contractor model.

Nevertheless, the California Supreme Court in a case known as Dynamex Operations v. Superior court, will soon issue a ruling that could significantly impact the precedent set in this case.

The chapter is far from closed on this hotly contested matter and companies engaging contractors for delivery and other positions in the gig economy should continue to be vigilant in establishing arm’s-length relationships with the business entities that they contract with to provide services.

ABD has experience both in contractor verses employee classification, as well as the unique insurance coverages required by the gig economy.

Paul Finkle, CMC, SPHR – Executive Vice President

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services

Requiring an Independent Medical Exam Under the ADA

You have reason to believe that an employee, who has suddenly started showing increasingly erratic behavior, is struggling to do her job and negatively impacting her co-workers. What can you do?

Can you require that worker to undergo an independent medical exam before returning to work? Back in 2016, the case of Monroe v. Consumer’s Energy came before the US District Court in Michigan and tested the legality of such a move. In this case, a long-time employee (13 years), Ms. Evangelene Monroe, suddenly began having trouble focusing and concentrating at work and stopped interacting with her co-workers. She then began accusing those co-workers of tracking her — via a GPS on her car — and doing surveillance by placing listening devices in the office that intercepted her text messages. Monroe’s supervisor made and documented these observations.

The company investigated Ms. Monroe’s allegations but didn’t find any evidence to warrant them valid. The company then asked Monroe to undergo an independent medical exam (IME) to determine if she was capable of performing the essential functions of her job. On several occasions, Monroe was found crying at her desk. Eventually, she was placed on leave until the IME was completed.

Monroe did undergo the IME eventually, which revealed “indications of a high degree of interpersonal sensitivity, tendency toward paranoid thinking and difficulty in interpersonal relationships. This examinee is likely to appear guarded and suspicious of others …”

The doctor recommended 12 counseling sessions and a reevaluation before Monroe could return to work. Although she eventually agreed to these demands voluntarily, she first filed an EEOC charge against her employer, claiming the mandatory IME effectively indicated that her employer regarded her as being disabled under the ADA.

In its ruling, the court tackled the “regarded as” disabled claim and applied it to Monroe’s situation to determine if the IME was for invalid reasons.  Under the ADA, an employee is “regarded as” being disabled:

“if the individual establishes that he or she has been [discriminated against] because of an actual or perceived physical or mental impairment whether or not the impairment limits or is perceived to limit a major life activity.”

The court pointed out that when an employer sees health issues that may be adversely affecting a worker’s job performance, it doesn’t necessarily mean the employer has regarded that worker as disabled. In fact, a request for a medical exam “is not evidence of discrimination because it ‘does not prove the employer perceives the employees to have an impairment that substantially limits one or more of the employee’s major life activities.’”

In this case, the court said, Monroe’s unusual behavior, including the nature of allegations against her co-workers in her internal complaint, coupled with performance issues would have caused any reasonable employer to inquire as to whether she was still capable of effectively doing her job … Consumers Energy had a reasonable basis for referring Monroe for an IME to evaluate whether her actions could have been undermining her ability to effectively do her job. Because Monroe cannot show that her IME referral was done for invalid reasons, she cannot establish that it was an adverse employment action or was discriminatory …”

Significance

The ADA specifically states that employers may require a medical exam that is job-related and consistent with business necessity and, as this case shows, if you notice the employee’s behavior or personal issues are affecting that person or their co-workers, you can require the exam as a condition of returning to work.

More specifically, the EEOC provides the following guidance:

Generally, a disability-related inquiry or medical examination of an employee may be “job-related and consistent with business necessity” when an employer “has a reasonable belief, based on objective evidence, that: (1) an employee’s ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition.”

An employer’s reasonable belief that an employee’s ability to perform essential job functions will be impaired by a medical condition or that s/he will pose a direct threat due to a medical condition must be based on objective evidence obtained, or reasonably available to the employer, prior to making a disability-related inquiry or requiring a medical examination. Such a belief requires an assessment of the employee and his/her position and cannot be based on general assumptions.

Malcolm Whyte, SPHR – Vice President HR Services

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services