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Attorney offers 'cynical' view of independent contractor litigation in the sharing economy

By Karen Kidd | Aug 7, 2016

Law money 10

COLUMBUS, Ohio (Legal Newsline) – Sharing economy litigation such as the misclassification lawsuit filed in June against Grubhub is more about governments and predatory plaintiffs than anything inevitable in cooperative consumerism, an Ohio attorney opined during a recent interview.

"The independent contractor model is not new by any stretch," J. Allen Jones III, a partner and transportation industry attorney in Benesh's Columbus, Ohio, office said during a Legal Newsline email interview. "It has utilized and continues to be utilized successfully in many industries. Some may view my perspective as a bit cynical, but I believe the current litigation trend is being largely driven by governments looking for sources of additional revenue and the class-action plaintiffs’ bar preying on a new set of victims."

Grubhub, the online food menu, ordering and delivery service, is the target of a proposed class and collective-action suit filed June 28 in U.S. District Court for the Northern District of Illinois. Six Grubhub drivers from Chicago; Portland, Oregon; Philadelphia; Brooklyn; and Bridgeport, Illinois claim Grubhub violated hour and wage laws under the Federal Labor Standard Act, in addition to state labor laws. The drivers claim they often worked more than 40 hours per week without overtime pay and that they also had to pay some costs just to do their jobs.

The drivers in the case, Souran, et al. v. Grubhub Holdings Inc., et al., are represented by various attorneys, including Boston-area plaintiffs’ attorney Shannon Liss-Riordan of Lichten & Liss-Riordan. Liss-Riordan, widely recognized as one of the nation’s top plaintiffs’ class-action employment lawyers, is best known for her counsel in the many cases against ride sharing companies Lyft and Uber. The lion's share of those cases have been aimed at Uber, including two in Massachusetts and California settled earlier this year.

Pseudo-cabs are only one segment of the sharing economy with litigation before the courts. A ruling by the U.S. Fourth Circuit Court of Appeals in June found that two Maryland dance clubs had misclassified exotic dancers as independent contractors, a decision expected to be significant for all businesses that have agreements with so-called "independent contractors."

Other pioneers of the sharing economy and collaborative consumption, such as DoorDash and RelayRides, also face litigation from customers and independent contractors.

Companies not usually associated with the sharing economy have run into legal problems over how they identify their independent contractors. In June, FedEx created a $228 million fund to settled a case brought by 2,000 FedEx Ground, and FedEx Home Delivery pickup and delivery drivers.

Drivers in the Grubhub case all worked for the Chicago-based food service between 2014 and 2015. The drivers claim they had to comply with a number of Grubhub requirements, including where to report for their shifts, where to pick up deliveries and how to dress on the job. The drivers claim they generally were paid a flat fee, in addition to tips from customers, that they were required to remain in a certain area as required by Grubhub, and had to accept all delivery jobs dispatched to them or risk being fired.

Despite the legal pressures, Jones said there are no additional difficulties in starting a business and employ mostly independent contractors in the shared economy.

"I don’t believe it’s any more or less difficult to start a business today engaging independent contractors," Jones said. "However, an entrepreneur can’t simply decide to use independent contractors, pay those contractors on 1099s, and operate the business as if all workers are employees."

Employers in the shared economy, as in any other part of the economy, must remember that independent contractors are not employees and they can’t be treated like employees, Jone said.

"Instead, they should be treated like any other vendor or customer that is important to the success of the business," he said. "Both parties, the business and the contractor, need to understand this relationship in clear terms so that each party knows its respective obligations under the contract."

Jones would not say whether he thought Grubhub would prevail in this case.

"It is really too soon to predict," he said. "However, the courts have not been particularly friendly venues over the last several years for various segments of the transportation industry that use independent contractors in their businesses."

Jones did say that he believed it unlikely that a similar case in California would be consolidated with this  lawsuit.

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Organizations in this Story

LyftUber Technologies, Inc.GrubhubLichten & Liss-RiordanU.S. District Court for the Northern District of IllinoisU.S. Court of Appeals for the Fourth CircuitBenesch Law - Columbus Ohio OfficeFedEx Corporation