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Will Grubhub Trial Resolve Independent Contractor Question?

Silicon Valley lawyers have their eyes on Grubhub, one of the hottest, publicly traded tech companies on Wall Street.

It's not because the company can get them lunch faster than an elevator on a San Francisco high rise. It's because Grubhub's business model is on trial in a California courtroom.

And the legal question -- whether its drivers are employees or independent contractors -- could redefine the "gig economy."

Trial Delivery

Grubhub filed and lost a summary judgment motion recently in a case that is pending in a San Francisco federal court. U.S. Magistrate Judge Jacqueline Scott Corley set the case, Lawson v. GrubHub, Inc., for trial on Sept. 5.

If the case makes it to trial, it will be a first to address the independent contractor question that companies like Uber, Lyft, and others have escaped.

Shannon Liss-Riordan, who represents the plaintiff, is on top of the issue. She also sued Uber on behalf of drivers with similar claims. They want to be paid as employees -- with benefits like reimbursement and unemployment insurance -- and not to be short-changed as contractors who have to pay their own expenses.

Lawson claims he was not adequately reimbursed for expenses that he had to incur while performing deliveries and being on-call. Although his case was not certified as a class action, it may pave the way for more drivers.

Business Model Stall?

Independent drivers have helped companies like Grubhub, Uber, and Lyft jump ahead of competitors by offering drivers at a lower cost. Liss-Riordan told New York magazine: "They're trying to have their cake and eat it, too."

The magazine said Liss-Riordan could destroy the business model and "take the entire 'on-demand' economy down." So far, Uber has paid more than $100 million to drivers and Lyft at least $27 million to settle cases, while preserving their drivers' independent contractor status.

For now, Grubhub is holding on to its money and its business model.

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