9th Cir. Nixes Grubhub’s offer to retroactively apply prop. 22 (2)
But plaintiff Raef Lawson’s attempt to revive the claims on behalf of other workers failed. The unanimous decision of the three-judge panel sent the former delivery driver’s case to a lower federal court to apply California’s “ABC test”, making it harder for concert companies to defend business models that rely on independent contractors.
Lawson continued Grubhub in 2015 for classifying him as an independent contractor, a designation that made him ineligible for salaries and benefits granted to employees. He lost at trial, but the United States Court of Appeals for the Ninth Circuit in June heard arguments on whether Lawson’s case should be analyzed under the ABC Worker Status Test, which was created by a 2018 California Supreme Court decision and later codified by Bill 5 of the Assembly in 2019.
The panel rejected Grubhub’s claim that California Proposition 22 “diminished” the application of the ABC test to Lawson’s case. This voting initiative, funded by gig companies and approved by California voters last year, excluded app-based drivers and delivery drivers from the AB 5 app. 22 years ago been blocked by a separate trial.
Contested scope of prop. 22
“We conclude without difficulty that proposition 22 does not apply retroactively”, judge of the Circuit Court
The relevance of Proposition 22 to worker classification cases filed before it entered into force in December 2020 has been a confusing in the courts. In other gig-company cases, judges are weighing the arguments of
Grubhub argued that the Lawson case should not have been reconsidered after his loss at trial. They also stated that the approval of prop. 22 by California voters in 2020 protects the application-based worker subcontractor status of transportation and delivery companies, saying it should replace AB 5.
The California Supreme Court previously said the ABC test applied retroactively, but did not consider whether the expanded benefits provided by the state’s codified law should also be covered. The reimbursement of professional expenses is one of the most costly claims in this type of dispute.
Lawson’s lawyer, Shannon Liss Riordan, said the ruling was important because Grubhub still faces penalties under the California Attorneys General Act, or PAGA, and it was a positive development for Lawson that the court dismissed the arguments – used by other concert societies – according to which prop. 22 “decreased” the ABC test.
She said the court also agreed with the argument that concert companies cannot use Proposition 22 as a defense if they have not complied with its terms, which include the granting of certain benefits to workers. She said she would investigate whether the company complied with the initiative.
Grubhub’s lawyer, Théane EvangelisLawson said “tried and failed to prove his claims at trial, and the outcome should be the same in pre-trial detention.”
“Drivers who use the Grubhub app are and should be allowed to continue working as independent contractors,” she said in an emailed statement. “Grubhub is eager to present his case to the district court.”
Class claim failure
The Ninth Circuit agreed with the trial judge’s decision denying collective certification.
The panel said the drivers in the proposed class – with the exception of Lawson and one other person – signed agreements waiving their rights to a class action lawsuit. The lower court correctly determined that Lawson was “neither typical of the group nor a suitable representative.”
Lawson has also filed complaints under California’s Attorneys General Act, which allows aggrieved employees to sue for alleged labor code violations on behalf of the state. The lower court found that Lawson, as a contractor, could not pursue PAGA’s claims.
But with the Ninth Circuit dismissing the misclassification issue, Liss-Riordan said Lawson’s PAGA claims were rekindled, which could result in massive penalties for Grubhub.
Circuit judges also tasked the lower court with determining whether Lawson’s business expense claims should pass the ABC test. A court had previously rejected his claim that he was misclassified, but on a different multi-factor test.
The ABC test requires employers to prove that a worker is an entrepreneur. They must demonstrate that: A) the worker is free from the control and direction of the hiring entity; B) the worker performs work that is outside the ordinary course of business of the hiring entity; and C) the worker is habitually engaged in an independently established trade, occupation or business related to the work he performs.
Lichten & Liss-Riordan PC represents Lawson. Gibson, Dunn & Crutcher LLP represents Grubhub.
The case is Lawson v Grubhub, Inc., 9th Cir., N ° 18-15386, opinion 20/09/21.