Lawson v. Grubhub, Inc.

665 F.Supp.3d 1108

Raef LAWSON, Plaintiff, v. GRUBHUB, INC., et al., Defendants.

Case No. 15-cv-05128-JSC

United States District Court, N.D. California

Signed March 30, 2023

Shannon Liss-Riordan, Lichten & Liss-Riordan, P.C., Boston, MA, Thomas Fowler, Pro Hac Vice, Boston, MA, for Plaintiff Raef Lawson.

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

ORDER RE: RULE 52 BRIEFS

Re: Dkt. Nos. 301, 302, 311

JACQUELINE SCOTT CORLEY, United States District Judge

Raef Lawson alleges Grubhub improperly classified him as an independent contractor rather than an employee under California law and in doing so violated California's minimum wage, overtime, and employee expense reimbursement laws. (Dkt. No. 41.)¹ After a bench trial in 2017, the Court concluded Grubhub properly classified Mr. Lawson as an independent contractor under the Borello standard and entered judgment in Defendants' favor. Lawson v. Grubhub, Inc. ("Lawson I"), 302 F. Supp. 3d 1071 (N.D. Cal. 2018), vacated and remanded, 13 F.4th 908 (9th Cir. 2021); see S.G. Borello & Sons, Inc. v. Dep't of Indus. Relations, 48 Cal.3d 341, 256 Cal.Rptr. 543, 769 P.2d 399 (1989).

Following various developments in the law, the ABC test, not Borello, governs Mr. Lawson's minimum wage and overtime claims (unless an exemption applies).² See Lawson v. Grubhub, Inc. ("Lawson II"), 13 F.4th 908, 912-13, 916 (9th Cir. 2021); Vazquez v. Jan-Pro Franchising Int'l, Inc., 273 Cal.Rptr.3d 741, 478 P.3d 1207, 1215-16 (2021); Dynamex Operations W. v. Superior Court, 4 Cal.5th 903, 232 Cal.Rptr.3d 1, 416 P.3d 1, 40 (2018); see also Cal. Lab. Code § 2775(b) (codifying ABC test). The Ninth Circuit remanded for this Court to determine whether an exemption applies and to apply the ABC test in the first instance. Lawson II, 13 F.4th at 915-16. The Court gave Grubhub the opportunity to supplement the evidence in the trial record. (Dkt. No. 269; Dkt. No. 271 at 6-14.)

Before the Court are the parties' briefs pursuant to Federal Rule of Civil Procedure 52. (Dkt. Nos. 301, 302.)³ Having carefully considered the briefing, and with the benefit of oral argument on February 9, 2023, the Court makes the following findings of fact and conclusions of law in Mr. Lawson's favor on his minimum wage claim, but not on his overtime claim. All findings of fact about Grubhub relate to the period before February 2016, when Mr. Lawson last worked there.⁴

DISCUSSION

"If a party has been fully heard on an issue during a nonjury trial and the court finds against the party on that issue, the court may enter judgment against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue." Fed. R. Civ. P. 52(c). "Rule 52(c) expressly authorizes the district judge to resolve disputed issues of fact." Ritchie v. United States, 451 F.3d 1019, 1023 (9th Cir. 2006). "[T]he district court is not required to draw any inferences in favor of the non-moving party; rather, the district court may make findings in accordance with its own view of the evidence." Id.

Grubhub invokes the business-to-business exemption to the ABC test. See Cal. Lab. Code § 2776(a). It has the burden to establish the exemption applies. See id.; Lawson II, 13 F.4th at 917. If so, then Borello governs Mr. Lawson's minimum wage and overtime claims, see Cal. Lab. Code § 2776(a), and the Court's bench trial opinion found Mr. Lawson is properly classified as an independent contractor under Borello. If the exemption does not apply, Grubhub has the burden to show all three prongs of the ABC test are met in order to classify Mr. Lawson as an independent contractor for his minimum wage and overtime claims. See id. § 2775(b)(1); Lawson II, 13 F.4th at 911-12.

The Court informed the parties it will consider the evidence in phases, starting with criteria (2), (8), and (10) of the business-to-business exemption and Prong B. (Dkt. No. 269 at 2.) If Grubhub meets its burden to establish three exemption criteria, further proceedings will consider the other criteria; if it meets its burden to establish prong B, further proceedings will consider Prongs A and C. See Cal. Lab. Code §§ 2775(b)(1), 2776(a); see also People v. Uber Techs., Inc., 56 Cal.App.5th 266, 270 Cal. Rptr. 3d 290, 308 (2020), as modified on denial of reh'g (Nov. 20, 2020) ("[T]here are three steps to the ABC test, these steps may be considered in any order, and the analysis is at an end if the putative employer fails at any step.").

I. BUSINESS-TO-BUSINESS EXEMPTION

Criteria (2), (8), and (10) of the business-to-business exemption require Grubhub to establish the "individual acting as a sole proprietor, or a business entity formed as a partnership, limited liability company, limited liability partnership, or corporation ('business service provider')" who "contracts to provide services to another such business . . . ('contracting business')":

(2) . . . is providing services directly to the contracting business rather than to customers of the contracting business. This subparagraph does not apply if the business service provider's employees are solely performing the services under the contract under the name of the business service provider and the business service provider regularly contracts with other businesses.

(8) . . . advertises and holds itself out to the public as available to provide the same or similar services.

(10) . . . can negotiate its own rates.

Cal. Lab. Code § 2776(a).

At the outset, Grubhub's assertion that in deciding whether the exemption applies the Court must consider Grubhub's business (the contracting business) as a whole rather than in relation to Mr. Lawson is incorrect as a matter of law. The Labor Code requires the contracting business to show "[t]he business service provider" meets each criterion. Id. (emphasis added). Thus, the exemption focuses on Mr. Lawson's particular relationship with Grubhub.

As discussed below, Grubhub has not met its burden on criteria (8) and (10). As such, the Court need not analyze criterion (2). See Cal. Lab. Code § 2776(a) (requiring contracting business to "demonstrate[ ] that all of the following criteria are satisfied" (emphasis added)).

A. Criterion (8): Advertises & Holds Itself Out to the Public

1. Findings of Fact

Mr. Lawson was an aspiring actor, writer, producer, and director living in Los Angeles. Before working for Grubhub, he drove for Lyft, Uber, Postmates, and Caviar. He applied to Grubhub in August 2015 and performed deliveries between October 2015 and February 2016.

Once a week, Grubhub released a schedule of available shifts called "blocks" through an online program called "When I Work." Grubhub determined which blocks to make available for driver selection and the length of each block. Grubhub released blocks for specific delivery zones. Drivers were allowed to choose which zone they wanted to deliver in when they first contracted with Grubhub. When Mr. Lawson began driving for Grubhub there were three delivery zones in the Los Angeles area. Mr. Lawson chose the "Los Angeles-Metro" zone which was near his home. Grubhub later added a "South Bay" zone and Mr. Lawson signed up for that zone at some point. At his request, however, Grubhub reassigned him to the Los Angeles zone near his home.

Grubhub asked drivers to start each scheduled block in their zones and to stay near their zones during their block. At times Grubhub monitored whether drivers, such as Mr. Lawson, were in their zone at the beginning of their block. If the drivers were not in their zone, and, in response to a Grubhub inquiry did not indicate that they intended to be in their zone to make deliveries, Grubhub would remove the driver from that scheduled block; that is, the Grubhub app would not send them any further delivery offers during that scheduled block.

Drivers selected their schedules by signing up for blocks on a weekly basis. Blocks were usually released on Sundays and were limited in availability on a first-come, first-served basis. Each block was for a specific amount of time and drivers were required to register for an entire block, not parts of it, if they chose to register for a block at all. A block generally lasted from two to five hours and was oriented around mealtimes. Grubhub used the block system to have some idea of driver supply at a given time so that Grubhub could meet the anticipated demand for its restaurant partners. If a driver did not want to deliver during a block he signed up for, he could drop it or swap it with another worker.

Mr. Lawson chose the blocks he wanted to work. If Mr. Lawson did not want to work, he did not schedule himself. No one at Grubhub assigned Mr. Lawson blocks or instructed him to sign up for blocks. Mr. Lawson never made a delivery for Grubhub except during a scheduled block.

Mr. Lawson's agreement with Grubhub did not preclude him from doing business with other companies, even those that compete with Grubhub. Mr. Lawson often accessed the Postmates and Caviar apps during his Grubhub blocks and sometimes made deliveries for Postmates and Caviar while working a scheduled Grubhub block. For example, on January 29, 2016, Mr. Lawson scheduled himself for a 5:00 p.m. to 8:00 p.m. Grubhub block. During that time period he performed a delivery for Postmates and was logged in to the Caviar app during the entire Grubhub block. Mr. Lawson performed a delivery for Caviar or Postmates, and sometimes more than one delivery, during 17 of the 87 Grubhub blocks that Mr. Lawson signed up for and did not drop. Although he worked for other apps, Mr. Lawson did not run his own delivery business of which Grubhub was simply one client. He did not have business cards and did not contact diners...