Several Food-Delivery Startups Sued By Workers

Date: October 05, 2015

Drivers Allege Misclassification As Independent Contractors

As debate continues about worker classification, more workers in the so-called “on-demand” economy have filed suit. The Washington Post reported that in September, a group of food-delivery services were sued simultaneously in San Francisco court by drivers alleging they were misclassified as independent contractors rather than employees. There are class-action suits against GrubHub and DoorDash, while a suit against Caviar demands arbitration. Workers in the suit against GrubHub allege the company failed to pay them minimum wage or overtime, or cover fuel expenses due to their classification. CNBC reported that like a similar case in California that ruled against Uber earlier this year, the latest round of suits focuses on “how the drivers are treated by managers,” with plaintiffs “alleging workers are told where to go and how to dress, just like an employee.”

Wired reported that the attorney in these cases, Boston-based Shannon Liss-Riordan, has brought complaints against 11 on-demand companies, including Uber, Lyft, Washio, Homejoy, Handy, Instacart, Postmates, and Shyp. Following her suit against it, Homejoy shut down, while Instacart and Shyp have since “reclassified part of its workforce in what looks to be a reaction to pressure from these filings.” Liss-Riordan said of the latest cases, “There’s a lot of commonality among these cases. Companies basically hope to massively save on labor costs by classifying their workers as independent contractors rather than employees.” She continued, “All of these companies seem to be watching what other companies are doing, and thinking they can get away with it.”

What This Means For Small Businesses

The potential implications from these cases are far-reaching. As the Washington Post said, having to reimburse drivers for gas, mileage and tolls, for instance, “a requirement for companies based in California, could cost Uber” alone “billions of dollars.” While Uber is among the most successful startups, and might be able to absorb more wage and benefit costs, small businesses across the US could face extreme increases in labor costs from having to change worker classifications to provide benefits like overtime or paid leave.

Additional Reading

Fortune also covered the latest round of lawsuits.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

Related Content: Small Business News | Labor

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