This $586.56 San Francisco Lawsuit Could Destroy The Entire 'Gig Economy'

Tyler Durden's picture

When Raef Lawson filed his $586.56 lawsuit in San Francisco he probably didn't realize he could potentially end up disrupting the entire 'gig economy' that subsidizes a plethora of Silicon Valley tech giants from Uber to DoorDash, but that could very well end up being the outcome. 

As Yahoo points out today, Lawson used to be a delivery driver for GrubHub but now he finds himself at the epicenter of an ongoing legal battle over whether 1099 contractors working for firms GrubHub and Uber should really be counted at employees rather than independent contractors.

In a windowless, 15th-floor courtroom in downtown San Francisco last week, GrubHub was defending its 1099 independent contractor employment model for its delivery drivers.

 

There's no verdict yet, and there probably won't be for at least another week. This trial, Lawson vs. GrubHub, is looking to determine whether or not plaintiff Raef Lawson, an ex-GrubHub driver, was misclassified as an independent contractor while delivering food for GrubHub.

 

Lawson's lawyer, Shannon Liss-Riordan (pictured below), has spent a good chunk of time in this trial focusing on the amount of control she perceived GrubHub to have over Lawson during the time he delivered food for them. She's trying to prove that Lawson's employment met the conditions of the Borello test, which looks at circumstances like whether the work performed is part of the company’s regular business, the skill required, payment method and whether the work is done under supervision of a manager. The purpose of the test is to determine whether a worker is a 1099 contractor or a W-2 employee.

GrubHub

 

Of course, the entire business model for companies like Uber hangs in the balance as adding 1,000s of employees to their own payrolls would drastically change, if not completely destroy, their business model. 

For now, these employers bring on 1099 contractors to avoid paying taxes, overtime pay, benefits and workers' compensation.  But, if that were to change, the cost of that Uber trip would suddenly look a lot like your taxi fare from 10 years ago.

Those who work as 1099 contractors can be their own bosses, meaning they can set their own schedules, and decide when, where and how much they want to work. Being a 1099 contractor can also be a solid, lucrative side-hustle because you could theoretically work for several companies at once. As noted in this trial, Lawson also delivered food for other gig economy startups, including Postmates. For employers, bringing on 1099 contractors means they can avoid paying taxes, overtime pay, benefits and workers' compensation.

 

Although Lawson only seeks a small, estimated sum of $586.56, the result of the trial could potentially affect the employment models of companies like Uber, Lyft, Postmates, Caviar, DoorDash and many others.

Perhaps that's why it makes sense that, as Yahoo points out, Uber's undoubtedly high-paid "employment counsel team" has suddenly taken a very active interest in a tiny $500 lawsuit.

On day one, I noticed a member of Uber's employment counsel team watching closely, taking notes about the trial. That makes sense, given Uber has found itself as the defendant in similar lawsuits that have ultimately been settled before needing to go to trial.

But, who knows if we'll ever see a verdict in the Lawson vs. GrubHub trial...for some odd reason these types of cases keep get settled before a judge can rule on them.

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cheech_wizard's picture

I'd say it all depends on how much the guy feels his time is worth. Oh, and pain and suffering...

 

Bastiat's picture

I'm feeling sympathetic pain and suffering - can we make it a class action?

Fuckin Floyd's picture

the plaintiffs would get  ten cents each while their attorney would take millions 

TabakLover's picture

This guy has any brains he'll settle ....for a cool $1MM.   Hell, hope he does settle......... and I'll start driving fo Uber; and they'll be screwed, trust me.

HowdyDoody's picture

He should go for $6 million, more a penny more, not a penny less.

 

ASimpleTrader's picture

More than that. Of course I'm assumiong the guy is going to wind up an EX-independent contractor with GH and if they wanted to buy him off, would factor that into this thinking, loss of futre income potential.

At least I would factor that into my thinking.

Pernicious Gold Phallusy's picture

He's a sham client. The law firm planned and executed this. They found somebody who agreed to remain a client for as long as the law firm wants. It was the same with the asbestos lawsuits. The lawyers didn't give a fuck about helping anybody exposed to asbestos.

hotrod's picture

Seems like many companies should 1099.  Bet social security would like that

Seeing Red's picture

Has no direct effect on S/S payments -- the self-employed still pay that.  However, being S/E allows one to deduct [legit] business expenses, so there's that to consider.

hooligan2009's picture

prevention of a ruling = racketeering?

Not if_ But When's picture

FedEx has been somehow beating this private contractor issue for years.  Their drivers are obviously employees and...talk about impacting business models !!!!   CPL593H

DoctorFix's picture

They keep those employees just on the edge of "part time" and thus avoid a whole slew of issues.  Those fuckers rake it in but are so damn cheap when it comes to faithful employees

aloha_snakbar's picture

Back when I started working in construction, my first job was with a contractor who paid me via 1099; I paid my quarterly taxes, and there was never a problem. But if there *had* been a problem, and the IRS looked at it, they no doubt would have classified me as an employee. This situation is different, in that money is being siphoned off by a third party, GrubHub, to pay their employees, shareholders, etc...and this is where I can see Uncle Scam having a  problem with this, mostly due to the scale and the sheer number of companies trying to crawl through this loophole. IMHO from the contractors standpoint it is a better deal, because then you can file a Schedule 'C' and a whole new world of deductions opens up to you...

11b40's picture

Bingo! If you want to be independent and hustle, you want 1099's. you do, however, need realize there is more accounting involved.

Utopia Planitia's picture

The real question is:  Why does this all need to be so complex?  The answer is very simple - so a bunch of self-serving, power hungry maniacs in WA DC can CONTROL your life.

If I want to work for somebody and we agree on the conditions then it is none of the govt. business what the terms are.  Do you want the people in WA DC to now make decisions on the "terms and conditions" of your marriage?  That is precisely where this is going, and it is going to lots of other places too.

It is none of the govt's business how I sell my precious time in order to make a living.  (Yes, there are a very few exceptions to this rule. Don't miss the main point for the sake of focusing on exceptions.)

spanish inquisition's picture

The issue is how much control the company has over the grub hub driver. Are they or are they not on a schedule may be a factor.

Crawdaddy's picture

You got that right. Most people are not aware they have the option to tell the gang of bandits masquerading as "govt" to fuck off. Many don't know it is even an option. Instead of asking the simple question "why does the govt need to know about my business?" most will quibble about roads and bridges and schoooooools and the next step is "here are my balls in a jar massa, pardon my insubordination." Take my paycheck and thank you for the crumbs.

thisisallnonsense's picture

your logic is failed. you are not chosing your payment terms. its employment under their terms, you don't accept them you don't work. reasons like this is theoreticically why the government should exist

any_mouse's picture

Otherwise a John D Rockefeller would pay you in company scrip and have you live in a company town for life with no assets when you die.

Utopia Planitia's picture

You have torpedoed your own argument.  I have set my own terms and conditions for working for pay since I was 12.  Nobody taught me how, nobody have me any pointers.  I learned the hard way.  If I can figure it out then anybody can.  Yes, it does take time and effort.  I have been let go several times because the employer chose to stop allowing certain of my terms.  I could give a shit.  I left and immediately got work elsewhere.  There is always somewhere else to work.  Most people start off from the position that they are a "helpless vicitim" and want "mommy and daddy" to protect them.  There are plenty of places for people like that to work.  But once you accept THEIR terms don't come bawling to me that you are some poor, helpless waif.

Matteo S.'s picture

So, if you freely want to be a slave for the rest of your life, the government has nothing to do in the "free will" of both you and your master ?

Logically, someone who agrees to become a slave should not have a word about what the government can or can not do.

Why care about who is your master ? If you agree to being slave of a corporate master, then you should also agree to being slave of a government master.

Just be logical.

Pernicious Gold Phallusy's picture

If you turn to a leviathan with guns to make your working relationship better, you are now slave to the leviathan. Just as a prince who invites a second prince to defend the first princes' domain against a third party is now a subject of the second prince. I read that in some old Florentine book.

Matteo S.'s picture

Facebook or Uber are worse leviathans than the government.

stormsailor's picture

i wonder how uber gets around workers comp, unless the contractors provide them with workers comp certifications.

NYC_Rocks's picture

Another ridiculous regulation dictated by government that makes our markets inefficient.  What a waste of everyone's time and money. Voluntary employment at will is the only fair and reasonalbe solution.  Trying to define all the details that go into the definition of contractor vs employees is arbitrary.  Each person should enter into a contract with their employer and either agree or disagree to the terms.  No government interference is required.  More micromaging by government that only prevents our economy from becoming more efficient.

gdpetti's picture

'Voluntary'? 'Fair and reasonable'??? That is a very rare occurrance here in Purgatory... greed floats to the top and they make the rules, which don't apply to them. They create the obstacle course for us to run... from slaves and servants to freemen/women... nothing earned is ever easy... or it wouldn't be worth doing. Those terms like voluntary, fair and reasonable are used by most govts, religions etc to manipulate the masses... it's basic History 101... expecting otherwise is extremely foolish....

THis is interesting in that it has a long history of being used in the tech world like MS... they've been doing this for a very long time... can't remember when it all started, late 80s or was it the 90s that it really took off? Either way, MS is known for it, big time.

WTFUD's picture

Brilliant Idea if folks could read & rite as you'd soon realise that only unregistered workers accepting monkey nuts in payment with Zero Protections would be the preferred choice of the Dark-Forces.

You could end up like the Bangladeshi construction workers in Saudi & Vassal States, up shit creek with a kick in the gonads for your troubles.

TabakLover's picture

Bet your a slum lord...or at least a greedy fuck.

Utopia Planitia's picture

No, you just happen to be somebody who needs mommy and daddy make all your decisions for you.  Grow up.

Blankenstein's picture

Grubhub, the company with the intolerant, Clinton-supporting CEO who says employees who don't share his political views aren't welcome at his company.

"Grubhub CEO Faces Backlash After Telling Trump-Supporting Employees "You Have No Place Here"

http://www.zerohedge.com/news/2016-11-10/tech-ceo-faces-backlash-after-t...

WTFUD's picture

Deutschland Deutschland Uber Alles, la la la la lala lala la . . .

adr's picture

Considering you must work to a schedule based solely on the corporate entity you are automatically an employee, not a contractor. You don't get to choose when you deliver the food. 

The customer made a deal with Grubhub, not the driver. 

Buckaroo Banzai's picture

Reason #1,073 that income taxes are retarded

Stef1304's picture

Precious information.
Thanks
By the virtue of law, People, sometimes there is way to makes some of those big fat mighty 2.0 companies bend down their knee to you, simple citizen.

IF YOU CAN SEIZE THE DAY & USE THAT OPPORTUNITY. 

Mazzy's picture

Subcontractors should have multiple customers/employers to be considered subcontractors.  If you have one person who pays you, you are an employee.

JBilyj's picture

That's incorrect and not part of the rules. You cant be held responsible for someone elses laziness if they decide to not find another client (lyft)...

rockstone's picture

Where is that carved in stone?

rockstone's picture

Who's the asshole who decided that going to court was smarter than giving this guy his $600?

HowdyDoody's picture

Somebody paid by the hour invoiced?

davepowers's picture

ah, a lawyer?

no wait!

an insurance company lawyer

no, no an in house corporate counsel

ok, let's go with... a lawyer

 

 

 

Pernicious Gold Phallusy's picture

The law firm went looking for a "client" who signed a secret agreement not to get paid unless the lawsuit went as far as the law firm decided.

Mena Arkansas's picture

Employers love 1099 workers.

So they can weasel out of their share of FICA.

Provide no benefits whatsoever.

And fire their workers at will.

I work for one of these weasels.

rockstone's picture

Which, if that's your attitude, makes you too stupid to get a job.

11b40's picture

Why don't you go elsewhere?

Utopia Planitia's picture

That was your CHOICE.  If you want different working condtions then go someplace else that suits you better.  Meaning you want somebody to "take care of you and make all your difficult decisions".  If so there are lots of places you can go.  Just grow up and quit whining.