Carl Kanowsky, Esq.

The relationship between workers and the companies that hire them has undergone a sea change in the past 15 months, at least in California. The next three columns will track what the situation was in early 2018 and the fundamental alterations since then.

Terry and I were in San Francisco last year to – what else? – taste wine. Knowing we would be imbibing, I decided to use Lyft rather than drive back and forth to our hotel in Brisbane.

In 2018, there was a lot of controversy about how Lyft and Uber treat their drivers and those companies’ potential liability for the acts of their drivers.

Both Lyft and Uber have classified their drivers as independent contractors and not employees.

The rationale is obvious. If the driver is a contractor, the company needn’t worry about bothersome issues like workers compensation, health insurance coverage, collective bargaining, the employer portion of the employment tax, wrongful termination lawsuits, wage and hour compliance, and a host of other challenges.

From the driver’s point of view, there is no withholding of taxes and maybe a basis for deducting from their taxes things like the cost of their car.

Seems like a win-win, right? But not everyone agreed with this structure.

This was a dilemma facing hundreds of thousands if not millions of people. In February 2018, Judge Corley, a federal judge in San Francisco, in the Lawson v. Grubhub matter, wrote: “Under California law whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition. If Mr. Lawson is an employee, he has rights to minimum wage, overtime, expense reimbursement and workers compensation benefits. If he is not, he gets none. With the advent of the gig economy, and the creation of a low-wage workforce performing low-skill but highly flexible episodic jobs, the Legislature may want to address this stark dichotomy.”

What is the “gig economy?” I used to think it had something to with electronic stuff, like gigabit, or gigabyte, or giga-whatever. But, no, it’s more entertainment-related, like a musician saying she has a “gig” tonight. In other words, a one-time or short-term engagement to perform.

Gig economy is essentially this. WhatIs.com defines it: “A gig economy is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements.”

Grubhub, according the decision in the Lawson matter, faced the question of whether gig workers are employees or independent contractors. Grubhub said, not surprisingly, “Independent contractor.” Lawson had been a driver for Grubhub for four months. He sued Grubhub, saying he should have been treated as an employee instead.

According to Grubhub, the driver is a contractor who has agreed to perform this one service – delivering food to this one customer. The driver has the option, on any given day or night, to accept or reject driving assignments. So, each delivery is, in and of itself, a “gig.”

Given the great freedom the drivers have to accept or reject gigs; to determine when and how to handle deliveries (a driver can use his bicycle, if he likes); and, to deliver for Grubhub’s competitors, Judge Corley ruled that Lawson was an independent contractor.

In coming to this conclusion, Judge Corley relied heavily on the 1989 California Supreme Court case, Borello. In determining whether a worker was an employee under workers compensation law, the Borello court enumerated many factors that needed to be reviewed. Overall, the overriding consideration was, “How much control does the company have over the worker?” The more control exerted by the company, the more it looked like an employment relationship.

This was the standard used for decades in judging similar employment questions.

Then in late April 2018, the California Supreme Court decided Dynamex v. Superior Court. This set the employment world on its head. That will be the topic of the next column.

Carl Kanowsky of Kanowsky & Associates is an attorney in the Santa Clarita Valley. He may be reached by email at cjk@kanowskylaw.com. Nothing contained herein shall be or is intended to be construed as providing legal advice.