Three of the country’s most well-known food delivery companies are facing a legal battle to retain their business model and prevent a massive increase in labor costs.
On-demand food companies are the latest target for those who want to change the way internet and app-based businesses maintain their workforce.
Like ride-sharing company Uber, delivery companies GrubHub, Doordash and Caviar employ independent contractors rather than full-time employees. The arrangement allows the companies to avoid paying for a host of extra expenses, including parking fees, overtime, gas and phone data.
But this practice has come under attack from Boston-based labor lawyer Shannon Liss-Riordan, who is already battling Uber and a number of other businesses in the courts. Liss-Riordan filed lawsuits against the three businesses in a San Francisco Superior Court alleging they were breaking California law by misclassifying their workers.
Speaking to CNN Money, Liss-Riordan said, “they’ve all seen Uber do it and become so wildly successful that they think it’s OK.”
“[They’re] trying to use the excuse that there’s something new and different — the so-called ‘on-demand economy’ — and that they’re somehow licensed to ignore the wage laws,” she added.
In September, Liss-Riordan’s case against Uber was granted class-action status. Uber and its peers in the sharing economy such as Lyft have argued their flexible relationship with drivers enables them keep prices low and expand rapidly.
The lawsuits against GrubHub and Doordash are class actions while the Caviar complaint is on behalf of an individual driver in San Francisco. The Caviar case is going to arbitration thanks to a written agreement that Caviar workers are required to sign.
Uber is at the forefront of defending the model of using independent contractors rather than employees arguing it benefits drivers who can be their own boss rather than be tied down to a fixed set of hours and shifts.
Currently, Uber focuses on providing and developing its app and drivers who use it to pay a percentage of their fare to the company. If Uber were to lose the fight to maintain independent contractors the costs could be enormous. According to analysis conducted by Fortune, the cost to Uber of reclassifying its drivers as employees would amount to $4.1 billion, which could prove a major headache for the firm and stifle growth.
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