Dynamex and Grubhub: San Diego Employee or Independent Contractor?

We wrote recently about the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (Cal. Supreme Court April 30, 2018). See our discussion here.

Dynamex established new rules in California with respect to how workers and independent contractors are defined. Essentially, all workers are now to be considered “employees” unless the hiring entity can demonstrate three facts:

• The hiring entity exercises no or very little control over the workers;
• The work being performed is outside of the “usual course of business” of the hiring entity; and
• The workers have some form of independent licensure or are an independent profession.

While, on its face, Dynamex was limited to California Wage Orders, very likely, the case will be extended beyond the confines of Wage Orders. Even if limited to just Wage Orders, the new rules will still apply to millions of workers in California. Every San Diego employer should conduct a review of their relationships with independent contractor workers to ensure that those agreements conform to the new Dynamex standards. A good San Diego corporate attorney can help. Dynamex also has far-reaching implication for copyrights and other intellectual property created by workers.

San Diego Corporate Law: Revisiting Grubhub

Dynamex will have far-reaching implications. Indeed, the US District Court case involving Grubhub that we discussed here is now likely to be revisited and reversed.

As noted, in February 2018, Federal Magistrate Judge Jacqueline Scott Corley ruled that Grubhub’s drivers were correctly classified as independent contractors. Shortly thereafter, the Dynamex opinion was delivered (April 30, 2018). On June 6, 2018, based on Dynamex, Judge Corley granted a motion to stay enforcement of costs by defendant Grubhub against the plaintiffs. The judge stayed enforcement of costs pending the plaintiffs’ appeal to the US Ninth Circuit based on the likelihood that that appeal would be successful. As Judge Corley stated: “Given that the California Supreme Court adopted a new independent contractor test, there is a strong likelihood that Plaintiff’s appeal [in this case] will at least result in a remand.” See June 6th Order here.

As a reminder, the Grubhub case involved whether its drivers were properly classified as independent contractors. See Lawson v. Grubhub, Inc., Case No. 15-cv-05128-JSC (N.D. Cal. February 8, 2018). See LA Times News report here. Grubhub operates a website and phone app where users can order food from various participating restaurants and Grubhub has a large number of drivers that then pick up and deliver the food. The drivers sign up with Grubhub, set their own hours, and use their own cars or bicycles or other vehicles for the deliveries. Grubhub classified all of its drivers as “independent contractors.” The plaintiffs in Grubhub argued that they were really “employees” and thus, entitled under California law to various employee benefits such as unemployment, overtime, vacation days, and workers’ compensation, and the like.

As noted, in February 2018, Judge Corley applied the long-standing California rules and concluded that the Grubhub drivers were independent contractors. However, as we mentioned in our previous discussion, the case was close — that is, under the old test, Judge Corley almost ruled that the Grubhub drivers were “employees.” With the new test in Dynamex, it is almost certain that the Grubhub drivers will be deemed “employees.”

San Diego Corporate Law: Applying Dynamex to Grubhub

Under Dynamex, the “default” setting for workers is “employee.” Dynamex explicitly placed the burden on the hiring entity to prove that workers are “independent contractors.” As can be seen from a cursory glance at the list of three facts above, Grubhub is unlikely to prevail on items #2 and #3. With respect to #2, Grubhub’s “usual course of business” is food delivery, which is exactly what the drivers do. Furthermore, the drivers are not independent professionals like plumbers or physicians, with their own licensure and professional qualifications.

In short, the US Ninth Circuit is likely to reverse Grubhub and, upon remand, Judge Corley is likely to deem the Grubhub drivers to be “employees.”

Contact San Diego Corporate Law

As noted, all independent contractor agreements should be reviewed and revised to ensure that those agreements conform as closely as possible to the new Dynamex standards. It is possible that some agreements should be abandoned since they will not satisfy the new Dynamex test. For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard provides a full panoply of legal services for San Diego and California businesses. Mr. Leonard has been named a “Rising Star” three years running by SuperLawyers.com and “Best of the Bar” by the San Diego Business Journal.  Mr. Leonard can be reached at (858) 483-9200 or via email.

You Might Also Like:

How Trusted Legal Counsel Can Help Your Business Grow

Importance of Written Contracts

What is an Unpaid Internship?

US Supreme Court: San Diego E-Commerce Businesses Have to Collect Sales Taxes