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The gig economy continues to grow, but gig workers hoping for workers compensation coverage face an uncertain future.
Their employment status, or lack thereof, and therefore their eligibility for workers comp benefits is often determined by how tightly the gig company controls their schedules and other aspects of their work, according to legal experts.
In the California federal court case Lawson v. Grubhub Inc. et al., a judge ruled last month in favor of Chicago-based Grubhub Inc., an online and mobile food ordering company that allows users to receive deliveries from local restaurants.
Raef Lawson, a former Grubhub delivery driver, alleged that he was an employee and should be compensated for unreimbursed expenses, while Grubhub argued that Mr. Lawson was an independent contractor. The judge ruled that since Grubhub did not control how Mr. Lawson made deliveries, his transportation, his appearance or his schedule, he was correctly classified by the gig economy company as an independent contractor.
The level of control companies place upon workers is a huge factor when it comes to determining if gig economy workers are considered employees instead of independent contractors, according to legal experts.
“The law requires you to look at whether these workers are controlled or not controlled by these companies,” said Simona Agnolucci, a San Francisco-based partner at Keker, Van Nest & Peters L.L.P. “You look at things like who sets their schedule, who tells them what to do, and one important consideration is that many gig economy workers do what’s called ‘multi-apping.’ They log in and out of various platforms during a single workday. So they might give a Lyft ride, then pick up a Caviar delivery, and then make a trip for Postmates. Employees don’t work that way. You don’t walk into McDonald’s, make a burger and then take off your uniform and go next door to Burger King, fill a few orders for them and go back to McDonald’s.”
Mr. Lawson’s attorney plans to appeal the court’s decision.
“The California Supreme Court is considering adopting a stricter test for employee classification, under which we would have won under the court’s reasoning, so we are going to ask the court to wait while the Supreme Court issues its decision in that case (Dynamex Operations West v. Superior Court),” Mr. Lawson’s attorney, Shannon Liss-Riordan, San Francisco-based partner at Lichten & Liss-Riordan P.C., said in an email.
The company is pleased with the court’s decision and is prepared to defend it if an appeal occurs, according to an emailed statement from Grubhub’s attorney, Michele L. Maryott, a partner with Gibson, Dunn & Crutcher L.L.P. in Irvine, California.
While the case centers on wage and hour issues, some experts say it is significant for the gig economy and the misclassification question, which could determine whether workers can receive comp benefits.
“Regarding the impact on workers comp and employee status, the two are really tied together very closely,” said Richard Meneghello, a Portland, Oregon-based partner at Fisher & Phillips L.L.P. “If the judge were to have decided that Lawson were an employee and not an independent contractor, then Lawson would have been entitled to workers comp benefits.
The ruling is significant in that it forecloses the opportunity for other Grubhub drivers to make a similar argument and to essentially ask the court to put them in the category of employees that should be deserving of workers comp benefits.”
But the decision is limited in its scope, according to other experts.
Although the decision is “helpful” to gig employers, the legal standard for independent contractor status under wage laws and workers compensation statutes are often very different, said Cheryl Wilke, a Miami-based partner at Hinshaw & Culbertson L.L.P.
“It is anticipated that individuals will continue to pursue employment status under state workers compensation laws which favor coverage,” she said.
The comp industry has not engaged with the gig economy in any meaningful way and is mostly taking a waitandsee approach, experts say.
“What I’m seeing, looking at the industry as a whole, is that everyone knows that this is an issue and they are having dialogues internally within the industry and at their companies, but they are waiting to see,” said Christina Goldschmidt, New York-based vice president of customer experience design at digital experience agency Cake & Arrow who has researched and written about the gig economy and commercial insurance. “It’s a gray area, and it’s going to be either an opportunity or a larger risk that emerges, but right now they have yet to figure that out. People are trying to propose ideas that would be a win-win.”
Last year, Uber Technologies Inc. began taking steps to provide a version of workers comp coverage to its drivers. In some states, Uber drivers have access to an insurance program for workers injured on the job that would help pay medical bills and replace their normal earnings. The coverage would cost drivers less than 4 cents per mile.
Uber’s program is unique, and gig economy companies may be hesitant to provide coverage for workers because it would place them in the category of employer, experts say.
“I would think that in order to do this, companies would want some sort of bargain with state and federal regulators,” said Mr. Meneghello. “In other words, we are willing to do this to provide a greater safety net to workers in the gig economy, but we don’t want to get burned for it. We don’t want you to turn around and say, aha, as a result of you doing this thing ... we are going to rule in these other cases that these people are employees and not contractors.”
Grubhub Inc. is not the only gig economy company to grab headlines when it comes to the employees vs. independent contractors debate.