Grubhub Independent Contractors

Judge Rules Grubhub Drivers Independent Contractors Not Employees

In a significant court decision on the status of gig-economy workers, U.S. Magistrate Judge Jacqueline Scott Corley concluded on February 8, 2018, that drivers for Grubhub Inc. are independent contractors and not employees under California law. The ruling may have implications for other sharing economy companies, including Uber and Lyft, whose business models are built on pairing customers with products and services through apps while avoiding the personnel costs of traditional employment.

Lawson v. Grubhub Inc.
The case against Grubhub was brought by Raef Lawson, who worked as a food-delivery driver for less than six months while pursuing a career as an actor and writer. In 2015, Lawson sued Grubhub claiming the company violated California labor laws by not reimbursing his expenses, paying him less than minimum wage and failing to pay overtime. Lawson claimed he should have been classified as an employee, not a contractor.

The case was originally filed as a proposed class-action lawsuit, but the judge never granted that status, so it was only limited to him and his claimed $600 in damages–consisting of back wages, overtime, and expense reimbursement. Both sides had agreed that Judge Corley, rather than a jury, would decide the case in her San Francisco federal courtroom. Closing arguments were heard in late October 2017.

Borello Test
A key element of the case centered around the Borello test, which is used to determine whether a worker is a 1099 contractor or a W-2 employee. The Borello test considers workplace circumstances like whether the work performed is part of the company’s regular business, the skills required to do the job, payment methods, and whether the work is done under the supervision of a manager.

Elements of the case in Lawson’s FavorGrubhub Independent Contractors “Grubhub did control some aspects of Mr. Lawson’s work,” Judge Corley commented. “Grubhub determined the rates Mr. Lawson would be paid and the fee customers would pay for delivery services. While the Agreement states that a driver may negotiate his own rate, this right is hypothetical rather than real. The Court finds that Mr. Lawson could not negotiate his pay in any meaningful way and therefore this fact weighs in favor of an employment relationship.”

Elements of the case in Grubhub’s Favor
In Judge Corley’s estimation, in addition to working for other gig economy companies while simultaneously working for Grubhub, Lawson was fundamentally “not credible.” By his own admission, Lawson “gamed the app” by scheduling himself for a work shift (a “block” in company parlance) but received few, if any, actual delivery orders by putting his phone in airplane mode, among other tactics.

“Mr. Lawson’s claimed ignorance of his dishonest conduct is not credible,” Judge Corley wrote. “Mr. Lawson would remember if after he filed this lawsuit against Grubhub he cheated Grubhub. If he had not moved his smart phone to airplane mode, intentionally toggled available late, or deliberately engaged in other conduct to get paid for doing nothing he would have denied doing so at trial. But he did not.”

Other aspects that were not in Lawson’s favor of being treated as an employee included 1) he could set his own schedule, 2) largely wear whatever clothes he wanted, and 3) he could choose his own route.

The Decision
Under California law, whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition,” Judge Corley concluded.

“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. Based on what the Court observed at trial and the facts found, and after applying the Borello test, the Court finds that during the four months Mr. Lawson performed delivery services for Grubhub he was an independent contractor.”

Reaction
Shannon Liss-Riordan, Lawson’s lawyer, said she plans to appeal the ruling. “Among other issues, the California Supreme Court is considering adopting a more protective test for employee status, so I was surprised the decision was issued before the Supreme Court has issued that decision…we should have prevailed even under the Borello standard,” Liss-Riordan said. 

Matt Maloney, chief executive officer of Grubhub, said the company is pleased with the ruling, “which validates the freedom our delivery partners enjoy from deciding when, where and how frequently to perform deliveries…We will continue to ensure that delivery partners can take advantage of the flexibility that they value from working with Grubhub,” Maloney said.

Conclusion
People who work as 1099 contractors can set their own schedules, and decide when, where and how much they want to work. Employers utilizing 1099 contractors avoid paying taxes, overtime pay, benefits and workers’ compensation. However, some companies have recognized that some people don’t want to be independent contractors, and prefer the benefits that come with employee status. 

Additional Resources: Daily Journal article by Eric B. Kingsley: Let’s talk about a ‘hybrid’ worker. 

Employers are advised to review independent contractor relationships and evaluate agreements with third parties, and contact an employment lawyer with questions. To discuss these laws, or a potential claim on your behalf, feel free to call us toll-free at (888) 500-8469 or click here to contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

 

Court of Appeals – PAGA Plaintiffs Do Not Have to Assert Injury or Employer Knowledge in PayStub Violations

Two Key Points in Court of Appeal’s Decision In Lopez v. Friant & Associates, LLC PAGA paystub violations California lawyers

In a recent decision handed down by the First District Court of Appeal, civil penalties under the Private Attorneys General Act of 2004 (“PAGA”) as set forth in the Labor Code, can be awarded for incomplete or inaccurate wage statements even if the employee was not injured by the omission or inaccuracy and even if the omission or inaccuracy was not the result of knowing or intentional conduct by the employer. However, the trial court has discretion under PAGA to decline to award PAGA penalties or reduce the amount of those penalties based on evidence that the omission or inaccuracy was inadvertent.

Background

In 2015, Eduardo Lopez filed a single-count complaint under the California Private Attorneys General Act (PAGA) in California state court asserting that his employer, Friant & Associates, LLC failed to include the last four digits of its employees’ Social Security numbers or employee identification numbers on itemized wage statements, in violation of California Labor Code Section 226(a)(7).

Friant moved for summary judgment, arguing that the plaintiff failed to show that he suffered any injury resulting from a knowing and intentional violation of Section 226, as required by Section 226(e). The trial court granted summary judgment, concluding the employee must show more than a mere violation of Labor Code §226 and he also must demonstrate that he was injured as a result of a “knowing and intentional” violation.  Because the employee offered no evidence to contradict the statement of the employer that it was not aware the last four digits of employees’ Social Security numbers were not included on employees’ pay stubs, the court ruled in favor of the employer.

However, the appellate panel reversed, concluding that because a PAGA representative action is not an action for statutory damages, the employee did not have to demonstrate injury as a result of a knowing and intentional violation of Labor Code §226 to obtain the civil penalties under PAGA.  However, PAGA does allow the trial judge to decline to award PAGA penalties or reduce the amount of a PAGA award, based on the evidence that the error or omission in the wage statement was inadvertent.

“Because section 226(e)(1) sets forth the elements of a private cause of action for damages and statutory penalties, its requirement that a plaintiff demonstrate ‘injury’ resulting from a ‘knowing and intentional’ violation of section 226(a) is not applicable to a PAGA claim for recovery of civil penalties,” the court wrote. The panel further explained that its interpretation was bolstered by “the fact PAGA expressly recognizes a claim for violation of section 226(a), but does not mention 226(e),” the court said. “Thus, by its plain language, PAGA allows a claim for violation of section 226(a) without any reference to subdivision (e).”

PAGA

California rolled out a unique approach to enforcing the State’s Labor Code when it enacted the Private Attorney General Act of 2004 (PAGA) codified in California Labor Code § 2698, et seq.  PAGA allows a private citizen to pursue civil penalties on behalf of the State of California Labor and Workforce Development Agency (LWDA) provided the formal notice and waiting procedures of the law are followed.

More specifically, PAGA allows current and former employees to file lawsuits to recover civil penalties that would otherwise only be recoverable by the government.  It is used for wage-and-hour and safety violations, and the lawsuits are filed on behalf of the named employee and other “aggrieved” current and former employees.

While similar to a “class-action lawsuit”, a PAGA claim is considered a “representative lawsuit,” and it can be pursued without meeting all the requirements of class certification.  That means it is easier for the employee’s attorney to pursue, but still has the consequences of aggregating multiple employees.

The concept behind the law is that the state’s labor agency does not have the resources to handle the penalty claims.  The statute authorizes private attorneys to step into the state’s shoes to pursue those cases and entitles them to recover reasonable attorney’s fees if the employee prevails.

Since its enactment, PAGA has been the source of much confusion and the legislature continues to review bills to modify PAGA. None of these bills deal with the differing interpretations about whether and how PAGA penalties apply to certain types of violations—particularly claims brought under section 226(a).

California Employment Lawyers

While questions remain about PAGA, and amendments continue to be filed, the there remains numerous benefits as a result of its passing more than a decade ago. Our firm continues to prosecute these claims as the best way to create change in corporate America. To further discuss PAGA, or a potential claim on your behalf, feel free to contact leading California employment lawyers at Kingsley & Kingsley. Call toll-free at (888) 500-8469 or click here to contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

 

California’s “New Parent Leave Act” for Smaller Employers

new parent leave actOn October 12, 2017, Governor Jerry Brown signed into law Senate Bill 63, or the New Parent Leave Act, effective January 1, 2018. The intent behind SB 63 is to provide employees of small companies job-protection leave similar that of the federal Family and Medical Leave Act (FMLA) or the California Family Rights Act (CFRA) which currently apply to employers with 50 or more employees.  

Who is Covered?

An employee is eligible for the leave if he/she 1) has at least 12 months of service with the employer, 2) has at least 1,250 hours of service with the employer during the previous 12-month period, and 3) works at a worksite in which the employer employs at least 20 employees within 75 miles. The new law does not apply to an employee who is covered under both CFRA and the FMLA.

What type of leave is provided to employees?

The New Parent Leave Act (SB 63) requires employers with between 20 and 49 employees to provide up to 12 weeks of unpaid job-protected parental leave to bond with a new child. Parents may take this leave within one year of the child’s birth, adoption or foster care placement. If, before the start of the leave, the employer does not provide the employee with a guarantee of employment in the same or a comparable position following the leave, they will be deemed to have refused to allow the leave. In other words, a covered employer is required to provide up to 12 weeks of “job-protected” unpaid leave to covered employees for new parental responsibilities. Similar to FMLA and CFRA, an employee is entitled to utilize accrued vacation pay, paid sick time, other accrued paid time off, or other paid or unpaid time off negotiated with the employer, during the period of parental leave. 

The bill specifies it will be an unlawful employment practice for an employer to:  

  • Refuse to allow an eligible employee to take up to 12 weeks of the bonding leave; 
  • Refuse to provide a guarantee of employment in the same or a comparable position before the start of the leave;
  • Refuse to maintain and pay for continued group health coverage for employees during the duration of the parental leave at the same level and under the same conditions that would have been provided had the employee continued to work; 
  • Refuse to hire, or to discharge, fine, suspend, expel, or discriminate against an individual because:
    • An individual’s exercise of the right to bonding leave;
    • An individual’s giving information or testimony as to his or her own bonding leave, or another person’s bonding leave, in an inquiry or proceeding concerning the bonding leave.
  • Interfere with, restrain, or deny the exercise of, or the attempt to exercise any right provided with respect to the bonding leave.  

Mediation Pilot Program

To avoid the same fate as a similar bill last year (SB 654-Jackson provided 6 weeks of parental leave), SB 63’s author, Senator Hannah-Beth Jackson, inserted language creating a parental leave mediation pilot program. Under the program, if an employer receives notice regarding an employee’s claim of violation of the parental leave law, the employer may request to mediate the dispute in a special Mediation Division Program within the Department of Fair Employment and Housing (DFEH). An employee may not pursue any civil action concerning the parental leave until the mediation is complete. The pilot program will be in effect until January 1, 2020. 

Impact on California Employers

First, something that could fall under the “frequently asked questions” category–what happens if an employer covered by SB 63 employs both parents entitled to the leave? In this case, the employer is not required to grant bonding leave that would allow the parents leave totaling more than 12 weeks. Second, what happens if a covered employee becomes disabled by pregnancy, childbirth, or a related medical condition? In this case, the employee is eligible for up to four months of pregnancy disability leave and up to 12 weeks of bonding leave.

California employers with between 20 and 49 employees should closely examine and revise their leave policies to reflect the new requirements of SB 63. Should you have questions about the New Parent Leave Act, or any of California’s labor laws, don’t hesitate to to contact leading employment lawyers at Kingsley & Kingsley prior to SB 63’s effective date of January 1, 2018. Feel free to call us toll-free at (888) 500-8469 or click here to contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

salary history ban

Governor Brown Signs AB 168 – Salary History Ban

salary history banSalary History Ban – California Law

On October 12, 2017, Governor Jerry Brown signed AB 168 into law, effectively banning employers from asking job applicants about salary history.

As we covered in previous posts, the language found in AB 168 has failed to get full endorsement twice before—first by Governor Brown when he vetoed AB 1017 in the fall of October 2015, and then again in 2016 when it was stripped from AB 1676 (fair pay legislation) prior to the Governor’s approval later in 2016. However, effective January 1, 2018, California will join Delaware, Puerto Rico, Oregon, Massachusetts, New York City, Philadelphia, and the city of San Francisco in prohibiting employers from inquiring into job applicants’ “salary history information”. 

Specifics of AB 168

Assembly Bill 168 prohibits all employers, including the Legislature, the state, and local governments, from seeking salary history information about an applicant for employment and requires an employer to provide the pay scale for a position to an applicant upon reasonable request, among other things.

Specifically, AB 168 stipulates:

  • The addition of section 432.3 to the California Code – section 432.3 prohibit employers from asking about or relying on prior salary information in deciding whether to offer a job and in deciding how much to pay.
  • Section 432.3 does not penalize employers when an applicant “voluntarily and without prompting,” discloses salary history information. [However, according to the California Fair Pay Act (Labor Code § 1197.5(a)(2)) employers may not rely on prior salary alone to justify any disparity in pay.
  • Section 432.3 will apply to “all employers”—both private and public.
  • Requires employers to provide, upon reasonable request, the pay scale for a position to an applicant applying for employment.
  • Section 432.3 becomes effective January 1, 2018.

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six flags overtime pay class action

Overtime Pay Meal Rest Breaks at Heart of Six Flags Class Action

Earlier this month, a California court judge issued a tentative decision denying certification of eight subclasses of amusement park workers in Case No. BC505344, Villegas v. Six Flags Entertainment Corp.  Los Angeles Superior Court Judge Ann I. Jones did however suggest she would consider certification of several others pending further briefing. 

Background

In April of 2013, plaintiffs Andrew Villegas, Jennifer Gilmore, Dustin Liggett and Hans Gundelfinger, all former Six Flags employees, filed a putative class action accusing their former employer of numerous labor law violations, including failure to pay employees overtime wages, provide mandatory meal and rest breaks or proper seating. The four plaintiffs sought to represent a class of current and former Six  Flags Magic Mountain and Hurricane Harbor employees who worked at the parks located north of Los Angeles.

The plaintiffs worked as ride mechanics, ride operators and game attendants at Six Flags Magic Mountain and Hurricane Harbor between August 2005 and July 2012, according to the lawsuit. Around the time of the original lawsuit, the parks employed approximately 39,000 seasonal employees (2012), compared to about 1,900 full-time employees. 

Class Certification

Six Flags Magic Mountain opposed the plaintiffs’ motion for class certification citing a lack of evidence of common issues–a particular requirement for class certification. Magic Mountain cited the significant number of employees working various jobs, specifically 25,000 employees, 25 different departments, and 255 positions.  

Numerous subclasses have been defined in this case:

  • “shaved time” subclass – a class consisting of workers whose wages were not fully paid
  • “walking time” subclass – a class consisting of workers who were not compensated for time spent walking to break areas
  • “rounding subclass” – a class consisting of employees whose hours were manually reduced
  • “regular rate subclass – two subclasses consisting of employees whose overtime rates were based on hourly rates, not “regular rate of pay”six flags overtime pay class action

Superior Court Judge Jones issued a tentative decision denying certification for the majority of the subclasses, including the “shaved time” and “walking time” subclasses. However, the judge suggested she would, upon additional briefing, consider certification of additional classes, namely the “rounding subclass” and two “regular rate subclasses”. As with the tentative ruling, judge Jones is sure to closely evaluate the presence of, or lack of commonality across each subclass as examples are brought forth by the plaintiffs.  

The experienced California employment lawyers at Kingsley & Kingsley will continue to follow this case and related class action cases dealing with California or national labor laws. In the meantime, to discuss these laws, or a related claim on your behalf, feel free to call us toll-free at (888) 500-8469 or click here to contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

 

automobile service advisor overtime exemption

Supreme Court to Resolve Circuit Split on Automobile Dealer Overtime Exemption

On September 28, 2017, the U.S. Supreme Court again granted certiorari to resolve a circuit split regarding whether “service advisors” at automobile dealerships are exempt from receiving overtime under an exemption for “salesmen, partsmen, and mechanics” under the Fair Labor Standards Act (FLSA). The case is Encino Motorcars, LLC v. Navarro, No. 16-1362 (U.S. Sep. 28, 2017).

Background
Historically, “service advisors” were included in the “salesperson” exemption. Beginning in 1973 with a federal appellate decision in Brennan v. Deel Motors, Inc., and continuing as recently as 2013 with the Montana Supreme Court’s decision in Thompson v. J.C. Billion, Inc., courts have uniformly held that Service Advisors are exempt from overtime under Section 13(b)(10) of FLSA.

Over the years, car dealerships have faced uncertainty since the U.S. Department of Labor’s (USDOL) track record in this area has been inconsistent. At times, the Department of Labor has said that service advisors could qualify for the exemption; at other times, it has said that they could not. At one point, the USDOL issued an interpretive provision where it took the position that service advisors did not fall within the exemption; however, several courts nevertheless applied the exemption and the USDOL said it would no longer dispute the issue.

The USDOL reversed course in April 2011 by deleting the controlling regulation, stating that the change reflected its view that the exemption should be limited “to salesmen who sell vehicles and partsmen and mechanics who service vehicles,” and that service advisors did not fall within this description.

The 9th Circuit Court of Appeals deferred to USDOL’s most recent interpretation of the exemption and became the first court to hold that service advisors are not exempt from overtime pursuant to the “salesperson” exemption.

Supreme Court Decision – June 2016

The Supreme Court heard and issued a ruling in this case in June 2016. The Court did not answer the question of whether service advisers are exempt from overtime. Instead, the Court held that the USDOL regulations that the Ninth Circuit Court of Appeals relied upon to hold that service advisors are not exempt were invalid. This decision by the Supreme Court is similar to decisions reached by the Fourth and Fifth Circuits. Rather than decide the matter, the Court remanded the case back to the Court of Appeals for reconsideration. On remand, the Court of Appeals reconsidered the issue without reference to the views of the Department of Labor. Looking solely at the language and intent of the statute, the Court of Appeals once again found that service advisors do not fall within the meaning of the terms “salesman, partsman, or mechanic” as used in the FLSA.

automobile service advisor overtime exemptionConclusion

Once again, the Ninth Circuit’s position on the exemption is at odds with rulings in the Fourth and Fifth Circuits. This time around, the Supreme Court is expected to resolve the underlying issue of whether the service advisors are entitled to overtime, providing needed certainty to employers. Until the Supreme Court definitively sorts this issue out, auto dealers who wish to classify their service writers or service advisors as exempt from overtime may wish to focus on the FLSA Section 7(i) exemption for employees of retail or service establishments who are paid primarily on a commission basis.

If you have questions about California wage and hour laws or Fair Labor Standards Act, don’t hesitate to contact leading California employment lawyers from Kingsley & Kingsley to take advantage of a free initial consultation. To discuss your situation call us toll-free at (888) 500-8469 or click here to contact us regarding your case.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)