Grubhub Agrees to Pay $24.75 Million in Worker Misclassification Case

Food delivery service Grubhub recently agreed to pay $24.75 million to resolve claims that it misclassified its delivery drivers as independent contractors and that it should have classified them as employees. Grubhub’s app allows users to order food from local restaurants, which delivery drivers then pick up at the restaurant and bring to the user who placed the order.

The original case was filed by Raef Lawson, a Grubhub driver who argued that Grubhub had misclassified him and similar drivers as independent contractors, not as employees. Eventually, the case became a class action, covering 60,000 Grubhub drivers throughout California. 

The class action lawsuit covers Grubhub drivers who accepted or completed at least one delivery in California between December 3, 2014, and March 13, 2026. It alleges that Grubhub violated California law by misclassifying these delivery drivers as independent contractors. By labeling them “contractors,” Grubhub avoided reimbursing drivers for business expenses and did not pay minimum wage or overtime, according to the lawsuit.

Grubhub does not admit wrongdoing by participating in the settlement. However, the company did agree to pay $24.75 million to resolve the lawsuit.

Under the terms of the settlement, class members will receive payment depending on the number of miles they drove for Grubhub during the covered period. The minimum payment will be $25, but drivers who completed more miles will receive larger amounts.

The settlement was reached after both parties raised concerns about continuing the lawsuit. Attorneys for the plaintiff were concerned that the court would reduce the amount of penalties Grubhub owed for minimum wage violations. The plaintiffs calculated these penalties, due under the Private Attorneys General Act (PAGA), would total more than $400 million. The plaintiffs were also concerned that Grubhub wouldn’t be able to pay a full judgment, especially since a recent $140 million judgment against the company by the Federal Trade Commission (FTC)  in a different case had been suspended in favor of a smaller, $25 million settlement. 

Grubhub disputed the $400 million estimate, as well as the underlying claim that it had misclassified its drivers. As the case proceeded, however, agreeing to a settlement allowed Grubhub to lay the matter to rest and refocus on other matters, including a 2025 data breach. Grubhub continues to deny the allegations that it misclassified its drivers.

California uses a three-part test called the “ABC Test” to determine whether a worker is an employee or an independent contractor. The test presumes that all workers are employees, unless the hiring company can show otherwise. To show that a worker is an independent contractor, the hiring party has to show three things:

1. The worker is not controlled or directed by the hiring entity when performing the work – both under contract and in fact,

2. The worker is doing work that is outside the course of the hiring entity’s normal business, and

3. The worker is “customarily engaged” in an independent business, trade, or occupation “of the same nature” as the work performed.

Workers classified as employees receive greater legal protections than independent contractors receive. For example, employees are covered by wage and hour laws, including overtime and minimum wage requirements. Employers must also make payroll deductions and withholdings for taxes and Social Security for employees, while independent contractors are responsible for their own taxes and Social Security payments.

In California, workers can file a claim if they believe they are misclassified. Employers found to have misclassified employees can face significant penalties. They may be required to pay restitution and other penalties. 

The plaintiffs in the Grubhub lawsuit argued that these factors weighed in favor of treating delivery drivers as employees, not independent contractors. Grubhub disagrees. 

Because the Grubhub case settled, the court did not have to apply the ABC test or reach a conclusion about the status of Grubhub drivers. This test remains an important tool to ensure workers throughout California are correctly classified, however. 

If you believe you’ve been misclassified as an independent contractor instead of an employee, don’t wait. Speak to the attorneys at McCormack Law Firm. We represent workers throughout the San Francisco Bay area. Call 415-925-5161 today to schedule a free initial consultation with our employment lawyers.

Disclaimer: This article is for information purposes only. McCormack Law Firm is not involved in this case. This case result does not mean future case results will be the same and results are not guaranteed.