A California Supreme Court decision that could make it harder for gig-economy companies to classify their workers as independent contractors should not apply retroactively, lawyers for the on-demand food delivery service Grubhub Inc. told a federal appeals court Tuesday.
Grubhub, represented by Gibson, Dunn & Crutcher, is resisting the push by a former worker to quickly apply the California Supreme Court’s decision to a pending worker classification dispute in the U.S. Court of Appeals for the Ninth Circuit. The worker is fighting in the appeals court to overturn a judge whose ruling in February supported Grubhub’s classification of its workers as contractors, not employees.
The California Supreme Court’s new worker classification standard, referred in court papers as the “ABC” test, is more rigid than the previously used scheme. Management-side lawyers tracking the case, Dynamex Operations West v. Superior Court, swiftly predicted gig-economy companies could face new pressure to redefine their workers as employees.
“Basic principles of fairness and due process preclude retroactive application of the new ABC test in a way that would nullify years of litigation and a full trial based on undisputed legal precedent dating back nearly 70 years, and potentially subject Grubhub to statutory penalties without fair notice of precisely what conduct could give rise to liability,” Grubhub’s lawyers told the Ninth Circuit.
“More importantly, whether Dynamex may be applied retroactively in this case is a pure question of law that should be decided in the first instance by this court without need for remand,” the Gibson Dunn attorneys said. The state court ruling was a “tectonic shift in state law” and any retroactive application would expose Grubhub to “potentially massive liability.”
Labor and employment attorneys have said the Dynamex ruling could affect the business model of gig economy companies that build their workforces around independent contractors. On-demand companies contend their models give workers greater flexibility. Labor advocates are pressing such companies to provide certain benefits that widely come with a traditional employment relationship.
How the Supreme Court decision affects the Grubhub dispute will also be closely watched, as the case was one of the first battles to play out in a trial court.
Shannon Liss-Riordan, the Boston-based lawyer who represents the Grubhub worker, has urged the Ninth Circuit to return the case to the trial court for further review in the wake of the California Supreme Court ruling. The state court’s decision “upends” how the trial judge resolved the case in favor of Grubhub, Liss-Riordan said in a court filing this month.
“Notably, the Dynamex decision makes clear that California’s adoption of the ABC test is a reinterpretation of existing law, and thus the decision will apply retroactively, including to plaintiff in this case,” Liss-Riordan wrote in a court filing on May 4.
Two new worker classification lawsuits Liss-Riordan filed against against Postmates and Lyft Inc. also pointed to the California Supreme Court ruling.
Friend-of-the-court filings in the California Supreme Court’s Dynamex case ask the court to provide clarity on whether the decision should be applied retroactively, Grubhub’s attorneys said in their court filing Tuesday.
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