GrubHub Denies Food Delivery Label

Published on: 13 Oct 2017

Food DeliveryGrubHub are facing an awkward situation, as they claim to a federal court in California that they aren’t really a food delivery service.

Despite us all knowing that that is, in fact, what they do, the company will be using legal technicalities to try and avoid losing multiple lawsuits.

Classifying a service

Someone with a marketing job at GrubHub has their work cut out for them this week. While they may have been advertising themselves as a food delivery service for a long time, they now have to convince a federal court that that isn’t really true. In fact, they simply work with independent contractors who happen to be food delivery drivers.

The issue stems from the fact that they have been classifying their drivers as 1099 independent contractors, rather than W-2 employees. While the tax codes may mean nothing to those who haven’t worked in the States, the distinction is an important one. It affects pay, tax, and benefits in a legal sense. Right now the court is trying to decide whether it is legal for GrubHub to call them 1099s – and if it isn’t, lawsuits from drivers are sure to follow.

There are eight factors to the control test which decides whether or not someone can be classified as an independent contractor. One of these is that the work done by the worker must be part of the core business of the company. If GrubHub can prove that that is not the case, they can get away with it – and that’s the task facing COO Stan Chia now.

Marketing ToolHe is arguing that the company is actually little more than a marketing tool. In 2004, that’s how it started – helping restaurants to advertise themselves. Since they only added delivery options in 2015, he argues, that’s not a core part of their business.

Counterpoints playing a part

However, there is another side to the story. GrubHub merged with Seamless in 2013 and is currently in the process of acquiring Eat24, both of which are, in fact, food delivery services.

“I don’t know that I would say we’re doing any of this to grow a delivery business,” says Chia, but his dismissal might not be so easy to swallow when you look at the figures. GrubHub actually corners almost 25% of the digital food delivery service in the US, according to 2016 data.

There are currently around 7,000 GrubHub drivers who are backing Raef Lawson – a former driver who brought the case to the point it’s at today – and want to put together a class-action suit should the verdict come back against GrubHub.

So, what are drivers missing out on due to their 1099 status? W-9 classification means guarantees of a minimum wage, paid breaks, paid annual leave, unemployment insurance, reimbursement for work-related expenses, and more. This could be a very expensive case for GrubHub, and others – such as Uber – are watching very carefully to see what happens here. Uber has faced similar claims but has settled each with individual contractors out of court, so they have not yet had to face up to the same kind of legal confrontation.

If you’re cutting ties with GrubHub as a result of their treatment, don’t despair. There are plenty of food jobs available for you to consider instead. The great thing about the sharing economy is that this isn’t even the only food delivery service using the same model that you could work for.

Hailing taxiIt’s worth noting that when Uber came under fire in Spain and claimed they weren’t a taxi business, the European Court of Justice had none of it. They found that “the Uber electronic platform, whilst innovative, falls within the field of transport.”