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.



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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misksh's picture

Uber's business model is a loser now. Arcade City's business model is a winner because it's decentralized.

ToSoft4Truth's picture

1099 contractor also saves the corporation from sending in money to feed Social Security.


Good for them. 


Too bad for the old birds eating dry cat food.  LOL


Good Times Dog Food Meatloaf

Cash Is King's picture

All the USSC needs is a case in front of it that show's a GRUB driver delivering a bunch of food he/she laced with arsinic and after they discover the bodies, arrest the driver, you can bet your ass those who survived are going after those deep pocketed publicly (some not) traded companies for millionns if not billions of dolllars!

Pinche Caballero's picture

I think this gal's intent is to blow up the industry with this lawsuit. Probably won't be a settlement.

Tech industry, "Oh, oh!"

Liss-Riordan: There’s not really a science; it’s more an art. One factor we look at is how big an impact the case would have. How many people would it cover? What’s the size of the company? Could they support paying people back for this kind of violation? We also just look at what we consider to be important, or interesting, issues. Even if a case wouldn’t affect a whole lot of people, [we think about] if it could set some important precedent that could in fact affect a lot of people, and then that’s the kind of case that would also be interesting for us to take.

FrankDrakman's picture

Right. She's not at all thinking of a new way of having employers and employees contract with each other. She doesn't mention that as 1099 contractors, they can deduct a lot of expenses that they couldn't as a wage slave. All she sees is a huge class action lawsuit so her film can take 40-50% of the settlement. 

Doncha just luv law-talking people?

Phillyguy's picture

What is the current state of the US? Since 2008, > 90% of “new” jobs are temp positions- read low pay, no benefits and no job security. Over half the US working population has less than $500 in the bank. Bottom line, the average Amurican is one paycheck away from not being able to afford rent or buy food.

rusty55's picture

And it all starts come tumbling down.

Drop-Hammer's picture

They are calling it the gig economy.  More like the kike economy.

Bricker's picture

ESPN and the NFL should also be sued for putting a terrible woman as the lead announcer on MNF. FFS I had to turn it off

pawn's picture

V for Vendetta U fucks

pawn's picture

I think there was a full moon not sexual mind me  Tyler where's Marla?

ClickNLook's picture

Maybe corporations are people, but people are not corporations.
I'm not even sure at this point if their even people.

directaction's picture

People are no longer people.

directaction's picture

"Here's a million dollars if you drop this $500 suit."
"Make it five million."

VideoEng_NC's picture

As someone who's been dealing with at least 6 of each (W2 & 1099) every tax year for the last 10 yrs, this is exactly what could change the "gig" industry if it ever does get to court.


This all depends on which particualr gov't agency that we all loathe feels about how they're going to audit companies.  Fact is that the vast majority of the "gig" economy falls under W2 for the simple fact that the "giggee" is on a time clock dictated by the employer.  In the case of the new drivers for hire, my opinion is they're truly 1099...they make their own hours, end of story.


What's going to bone everything is how companies have been dealing with the wonderfuls, always loved, ACA.  Several years ago, that gov't agency (which will not be named) began lengthy audits & they determined what I stated earlier, most hired "gigees" are just contract employees, not contractors.  This changed the 1099's to shift to W2's.  But then the industry created a new status...part-time, no benefits.  Coincidentally, this was right around the time the ACA bacame law.


So fast forward to someone like me who maybe tours for a few years & makes decent money, very decent money.  But I'm considered part-time, no benefits even though I'm 250 days on the road on the compaany's clock doing waaay more than 40 hrs/wk.  Companies have been re-writing rules because of the ACA & it could very well come down hard in my opinion if a particular gov't agency decides to redefine "compliance".



hanekhw's picture

The only thing I can see between the 'gig' economy and outright servitude are slave quarters.

The serf system tied the people to the land and while not outright slaves their liberties were severely restricted and the master had little or no responsibility for their well being. Like the 'gig' economy where employers take none either. Did things work better when people had freedom AND were nurtured? That's a no-brainer you would think but we've become like our machines in how we use and dispose. It SEEMS efficient but that efficiency requires we take no responsibility for its long term effects. Part of the lack of labor participation may be part of those long term consequences. In accounting lost opportunity is an accepted principle. In our economy what's the cost of under utilizing labor?

moorewasthebestbond's picture

The government has been trying to kill 1099s since the internet boom in the 1990s.


The South was right!

LeftandRightareWrong's picture

The plaintiff might get a few bucks in matching employer taxes, but he loses all of his small biz expense deductions. How many m's in dumb?

Byrond's picture

Most Uber drivers make very little. That means tiny deductions. No benefits or unemployment neutralize your argument as well. 

Anarchyteez's picture

Fuck .gov and .gov rules. Get the hell out of our lives.

GoyimUprising's picture

They only have as much power as YOU give them.

Byrond's picture

Kind of seems that if you have to post an Uber sticker on your car, have your car approved by Uber, and follow all Uber rules while transporting an Uber customer with your car, then you are entirely an Uber employee whilst transporting customers in your car, and while traveling to pick up customers. Hence, the Achilles heel of Uber is the nature of cars. Which happen to be highly regulated, enclosed container-like devices that place the driver and the customer inside and together in a customer service area for significant periods of time. That's not an arbitrary contractor-type scenario, where the contractor fulfills a service for a company in an entirely independent manner. 


Pernicious Gold Phallusy's picture

The driver has control over how much money he can make, not the company. The Uber driver can Uber whenever he feels like it, or not. He can refuse a pickup. He can keep his car in a much better state than required in hope of receiving a tip or a better rating from the client.

Byrond's picture

And the same goes for any employee in the USA, unless slavery was reintroduced. Yes they can fire you. But you can do what you want in the meantime. But you can't pick up anyone in any old car using any app you choose to use, and then bill Uber. But if you could, you would be an independent contractor. Just because a company uses an app that you see on your incredible smartphone doesn't mean you should defend them like they're gods. 

Pernicious Gold Phallusy's picture

I think you really want a big friendly government to protect you so you don't have to do due diligence.

Byrond's picture

The US government exist to protect the wealthy. So yes, if I'm wealthy. Then there's countries like Sweden that are actually socialistic. 

pawn's picture

H I where can I F I N D myself on 0hedge?

Gallumhrasha's picture

Taxes in the end is just a big scheme to control and enslave. There are so many tax loopholes that "smart" people take advantage of and the rest of the population just pays what the government tells them to pay. I'd say stop complaining and start looking on how you can take advantage of tax loopholes.

Byrond's picture

Tell that to my former neighbor who's been living off full unemployment benefits for over a year in a new $500,000 house. 

GoyimUprising's picture

Poor people don't pay taxes, because they have nothing the government can steal.

Rich people don't pay taxes, because it would be more lucrative to hire a private army.  


If you pay taxes, you are an idiot.

Pernicious Gold Phallusy's picture

Contract driving jobs are simply a way of monetizing a car while it still runs. The money drivers bring in via Uber, Lyfft or pizza delivery isn't nearly enough to cover the actual cost of owning and maintaining a car. A job such as this is only helpful to somebody with a realistic expectation of finding better employment in the near future - such as a college student aiming at a worthwhile degree, or somebody definitely employable while looking for a good job they know they can get. They are using up their car faster in order to get to that better job.

People with no hope of a better job are harming themselves long-term by doing contract driving. They are using up their asset faster than otherwise and not being compensated enough for this.

Most people doing contract driving can't or won't understand all this. I can't really blame the company for taking advantage of people's willingness to sell their capital goods at a loss.

May taxi drivers were and are in a bad situation, too. People had / have to lease the taxi per diem from the company at a very high rate. It is hard to get enough fares to cover just the lease. Both kinds of jobs - taxi driver and contract driving - appeal to people who can't do math.

Byrond's picture

I was thinking the same thing. But many people have nothing else to do. It'll be a bad employment report the day that Uber goes under. Dow down 2,000 points. 

headless blogger's picture

BINGO!!! My sister went to an interview for a company where they wanted her to drive her own car each day (and only days they needed her) and where she would be required to drive up to 50-100 miles one way. She would be going to Medical offices and scanning records. She did not take the job of course. On top of all that, she would be expected to work as a "contractor".

So, ya, these companies are taking advantage of people who cannot do the math. 

GoyimUprising's picture

Depends.  I knew a woman who worked in the "Medical" field and got paid VERY handsomely to travel.  If you talk to home healthcare workers, they usually encourage you to let them drive you to your doctor's appointments/etc, because their mileage reimbursement is actually lucrative.

Pernicious Gold Phallusy's picture

Hmmm... the vast majority of people have no idea how frighteningly expensive it is to have a car. I doubt many people who drive their own cars for pay are being compensated adequately.

Byrond's picture

Obviously. But people like cars and smartphones, and they're willing to volunteer for slavery to use them every day.

Faeriedust's picture

No, they're taking advantage of people who have to pay the rent and have no other immediate options.  People who are desperate NOW.  It's not a matter of choice; it's a matter of survival, and when  you're in survival mode  you do whatever you have to to stay afloat.  And of course go underwater a little more slowly but just as surely.


Byrond's picture

That's becoming the norm. Very scary. America is toast economically. 

GoyimUprising's picture

I met an Uber driver who got in early and used the opportunity to finance a really nice car.  Nice car = more Uber rides = paid off faster.  That's assuming the driver paid it off ASAP.  Very doubtful.  But, the guy did seem like he had a good head on his shoulders.  

Anteater's picture

I grabbed a ride with an Uber driver, an H-1B stayover who didn't make

the cut at MicroSoft or Apple or whatever, with his wife and children that

he brought over from India. I used to drive cab, so we talked in depth.

He still has to pay the same airport or hotel tithe that I did,  in this case,

$100 a day to the airport to be able to pick up passengers there. Most 

are short trips to nearby hotels, so he makes less than $7.50, then has

to get back in line behind 100 other Uber drivers. You can do the math.

I told him it was never any better in the old days, unless you bribed

the dispatch (I didn't know), or ran drugs (I was too scared) or ran

hookers (I did that for awhile, but it's not good karma). He is totally

desparate. He can't make rent, he's got this new car loan to pay off,

his kids need clothes. Jeez, so I told him be a construction laborer.

With all the Mexicans being booted out, you'll see 100,000s of over-

stay Hindus come out of the woodwork to replace them at the site.

Only problem is, Mexicans know what they're doing. Hindus, meh.

You wouldn't want to buy a house built by a gang of overstay Hindus.

Byrond's picture

Very nice. At least we won't be surprised when the economy officially crashes. 

mosfet's picture

This can only mean that GrubHub execs got too grubby/greedy and decided they wanted to tell this and every other 'employee' when, how and where they could work - including insisting they not work for the competition.  If so then, Yes, this and all of their psuedo employees' have a fair girevence; along with benefits and compensation due.

Corporate assholes want it both ways.  They want minions under their thumb but with the option of kicking them to the curb on a whim.  Fuck GrubHub.  I'll make a point never to use them.

GoyimUprising's picture

The term is Independent Contractor.... You either work for yourself or you're a slave.

pawn's picture

My music is bigger than the president

GoyimUprising's picture

Maybe your bowel movement.

GoyimUprising's picture

Legally, everyone is a 1099 contractor.  You have the right to contract without third party interference.  F@ck the IRS!

GoyimUprising's picture

If you're ever in a legal dispute with one of these corporations, just go after their algorithms.  It's a sure-fire way to a nice settlement.

GoyimUprising's picture

You'll either pay me on my terms or I'll withhold my services to mankind.  Fuck you.

pawn's picture

Mother Nature is pissed off ed

Byrond's picture

She really should be.