Two more startups sued as part of ongoing employee vs. contractor debate

A Boston lawyer has brought two new lawsuits seeking class-action status against tech companies, which she claims have mis-classified their workers as contractors rather than employees.

The attorney, Shannon Liss-Riordan, filed the two cases in state court in San Francisco on Wednesday, on behalf of former workers of GrubHub and DoorDash, both food delivery startups.

Liss-Riordan is also the attorney who brought a class-action lawsuit against Uber, currently in federal court in San Francisco. And she has sued on behalf of a Massachusetts woman who worked for Handy, an on-demand home cleaning service.

GrubHub and DoorDash are the latest in a group of tech companies that are now facing lawsuits where their current or former workers argue that they should in fact be treated as employees (where social security, unemployment and other benefits would be paid by the company) rather than independent laborers. One, Homejoy, even folded not long after being sued over similar issues.

The new San Francisco lawsuits are both very similar and allege numerous violations of California labor law, including failure to reimburse business expenses and failure to provide itemized wages. In the GrubHub case, the plaintiff also alleges a failure to pay minimum wage and failure to pay overtime, among other accusations.

DoorDash did not respond to Ars’ request for comment. Megan Gage, a spokeswoman for GrubHub, declined to respond to Ars’ request for comment.

"Thank you for reaching out, but we don't discuss pending litigation," she e-mailed. "Sorry we can't be of more help."

Both state and federal labor law have dealt with this issue for a long time, even outside app-driven startups.

"State wage laws say that pay is to be based on accrued time on the job, and is not dependent on an employee’s satisfactory performance of a task," Michael LeRoy, a law professor at the University of Illinois, e-mailed Ars.

"Exotic dancers have won a number of ‘misclassification’ lawsuits, where they have been paid as independent contractors and not as employees," he said. "Strip clubs in these lawsuits typically charge dancers a fee to rent a dressing room, another fee for stage time, a required ‘house tipping’ charge, and penalties for appearance faults, such as not wearing their hair down. Courts have ruled that the dancers are due minimum wages and overtime. Typically, these lawsuits allege federal and state violations. States are more specific about matters such as when to pay (basically, within a short time), and provide for prohibitions against deductions from wages."

Similarly, Byron Goldstein, an Oakland, California-based attorney, who represents similar cases against Handy and the now-defunct Homejoy, told Ars that such companies need to re-evaluate whether the contractor model really makes sense.

"Because if they are breaking the law, they're going to have lawsuits—and not that an employee model is always better—but for many of the sharing economy companies, it prevents disintermediation, and creates more loyalty from your workers, including less turnover," he said.

Indeed, in July 2015, the United States Department of Labor released a guidance document showing that it is watching the situation carefully.

That document states:

Misclassification of employees as independent contractors is found in an increasing number of workplaces in the United States, in part reflecting larger restructuring of business organizations. When employers improperly classify employees as independent contractors, the employees may not receive important workplace protections such as the minimum wage, overtime compensation, unemployment insurance, and workers’ compensation. Misclassification also results in lower tax revenues for government and an uneven playing field for employers who properly classify their workers. Although independent contracting relationships can be advantageous for workers and businesses, some employees may be intentionally misclassified as a means to cut costs and avoid compliance with labor laws.