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9th Cir. Nixes Grubhub’s Bid to Apply Prop. 22 Retroactively (2)

Sept. 20, 2021, 5:26 PMUpdated: Sept. 21, 2021, 12:41 AM

Grubhhub Inc. must continue to defend a six-year-old lawsuit alleging it misclassified food delivery drivers under California’s rigid worker-status test, the Ninth Circuit said Monday in denying the gig company’s push to wield Proposition 22 against one of its former drivers.

But plaintiff Raef Lawson’s attempt to revive claims on behalf of other workers failed. The three-judge panel’s unanimous ruling sent the former delivery driver’s case back to a lower federal court to apply California’s"ABC test,” which makes it harder for gig companies to defend business models that rely on independent contractors.

Lawson sued Grubhub in 2015 for classifying him as an independent contractor, a designation that made him ineligible for the wage and job benefits granted to employees. He lost at trial, but the U.S. Court of Appeals for the Ninth Circuit in June heard argument over 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 Assembly Bill 5 in 2019.

The panel rejected Grubhub’s contention that California’s Prop. 22 “abated” application of the ABC test to Lawson’s case. That ballot initiative, bankrolled by gig companies and approved by California voters last year, carved out app-based drivers and delivery drivers from enforcement of A.B. 5. Prop. 22 has since been blocked by a separate lawsuit.

Prop. 22’s Disputed Reach

“We conclude without difficulty that Proposition 22 does not apply retroactively,” Circuit Court Judge William Fletcher wrote in Monday’s ruling. “California has a settled presumption against interpreting statutes—including ballot propositions—as having retroactive application.”

Prop. 22’s relevance to worker classification cases filed before it took effect in December 2020 has been a source of confusion in courts. In other gig-company cases, judges are weighing arguments from Uber Technologies Inc. and DoorDash Inc. that the ballot measure can be used to dismiss litigation that predates it.

Grubhub argued that Lawson’s case shouldn’t have been re-litigated after he lost at trial. They also said California voters’ approval of Prop. 22 in 2020 protects the contractor status of ride-hailing and delivery companies’ app-based workers, contending it should supersede A.B. 5.

The California Supreme Court previously said the ABC test does apply retroactively, but didn’t consider whether expanded benefits provided by the codified state law should also be covered. Business-expense reimbursement is one of the costliest claims in this type of litigation.

Lawson’s attorney, Shannon Liss-Riordan, said the ruling was significant because Grubhub still faces penalties under California’s Private Attorneys General Act, or PAGA, and that it was a positive development for Lawson that the court rejected the arguments—used by other gig companies—that Prop. 22 “abated” the ABC test.

She said the court also agreed with the argument that gig companies can’t use Prop. 22 as a defense if they haven’t complied with its conditions, which include providing workers with some benefits. She said she will be pursuing discovery on whether the company is complying with the initiative.

Grubhub’s attorney, Theane Evangelis, said Lawson “tried and failed to prove his claims at trial, and the result should be the same on remand.”

“Drivers who use the Grubhub app are, and should be allowed to continue working as, independent contractors,” she said in an emailed statement. “Grubhub looks forward to presenting its arguments to the district court.”

Class Claim Fails

The Ninth Circuit agreed with the trial judge’s decision denying class certification.

The panel said the drivers in the proposed class—except for Lawson and one other person—signed agreements waiving their rights to a class action. The lower court correctly determined that Lawson was “neither typical of the class nor an adequate representative.”

Lawson also brought claims under California’s Private Attorneys General Act, which allows aggrieved employees to sue over alleged Labor Code violations on behalf of the state. The lower court found that Lawson, as a contractor, couldn’t pursue PAGA claims.

But with the Ninth Circuit remanding the misclassification issue, Liss-Riordan said Lawson’s PAGA claims are revived, which could mean massive penalties for Grubhub.

The circuit judges also tasked the lower court to determine if Lawson’s business-expense reimbursement claims should be subject to the ABC test. A court previously denied his claim that he was misclassified but under a different, multi-factor test.

The ABC test places the onus on employers to prove a worker is a contractor. They must show that: A) the worker is free from the control and direction of the hiring entity; B) the worker performs work that is outside the usual course of the hiring entity’s business; and C) the worker is customarily engaged in an independently established trade, occupation, or business related to the work they’re performing.

The Ninth Circuit panel included judges Paul Watford and Daniel Collins in addition to Fletcher.

Lichten & Liss-Riordan P.C. represents Lawson. Gibson, Dunn & Crutcher LLP represents Grubhub.

The case is Lawson v. Grubhub, Inc., 9th Cir., No. 18-15386, opinion 9/20/21.

(Updated with additional attorney comment about Lawson's PAGA claims. An earlier correction clarified that the Ninth Circuit upheld a judge's denial of class certification, which was separate from the PAGA issue.)

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Travis Tritten at ttritten@bgov.com; John Lauinger at jlauinger@bloomberglaw.com

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