Grubhub, a restaurant take-out delivery service, is facing a lawsuit brought by one of its delivery drivers. The driver claims that he was misclassified as an independent contractor, and as a result earned less than the minimum wage and was denied overtime pay and reimbursement for gas and vehicle maintenance.
The company denies that the plaintiff or any of its delivery drivers are misclassified. It points out that drivers are free to accept or turn down assignments, set their own hours and even work for competitors. That degree of freedom from Grubhub's control, the company argues, meets the main test for independent contractor classification.
Plaintiff: The independence Grubhub offers is illusory
In closing arguments, the driver's attorney argued that what truly makes a job at Grubhub more like an employment relationship than an independent contractor gig is the "true-up" incentive program. Under the program, drivers who accept 75 to 85 percent of the deliveries offered earn much more than those who don't.
Drivers who meet that minimum earn a guaranteed hourly wage of $11 to $15, known as the "true-up" rate. Drivers who don't are not "docked pay," but rather are paid a flat fee, Grubhub says. The company calls this an incentive program meant to encourage drivers to accept a greater percentage of the orders offered.
But the flat fee paid to lower-performing drivers, the plaintiff says, is often less than the minimum wage. Such a low rate doesn't act as merely an incentive, but as a penalty that allows Grubhub to exert control over the drivers.
Is the "true-up" program coercive? Are Grubhub drivers truly free to set their hours, reject assignments and work for competitors? Or does offering subminimum wage pay to those who do so actually make it impossible to make a living?
The answers to those questions could make a big difference. Under both California law and the federal Fair Labor Standards Act, the degree of control that a company exerts over its workers is a key factor in whether those workers should properly be classified as employees or contractors.