Grubhub claims it's not a food delivery company to avoid paying drivers more

Grubhub, which describes itself in regulatory filings and marketing copy as the leading platform for restaurant pick-up and delivery orders, is trying its best to convince a courtroom that's not what it is.

In the face of a groundbreaking lawsuit from two former delivery drivers, Grubhub chief operations officer Stan Chia took the stand on Friday to say that actually Grubhub is not a food delivery company; it's "the premiere marketplace connecting diners with restaurants," according to TechCrunch's report.

At issue in the trial is whether or not the two drivers should be considered more protected W-2 employees or independent contractors. Grubhub classified them as the latter, and they claim that was a violation of California employment law.

The point of this particular gambit is to satisfy a state legal precedent called the Borello test, which is used to determine proper employment status in the eyes of the law. Under its criteria, workers who are employed in a company's core business are more likely to be entitled to a more stable and robust job contract.

Thus, Grubhub must make the case that delivering food is not its core business, contrary to what much of its advertising and financial reports say.

It is true that Grubhub only got into the food delivery game in 2015 after a decade as an online ordering platform that only facilitated pickup and deliveries handled by restaurant staff. But it's doubled down on its own delivery operation since then, absorbing other major services like Seamless and Yelp's Eat24 along the way. As of today, it is by far the biggest food delivery service on the market.

A Grubhub spokesperson said in an emailed statement that delivery is a "significant component of the experience" for most of its customers.

"Grubhub works with its restaurant partners in one of two ways. We process orders for restaurants that employ their own delivery staff -- as is the case with a majority of our restaurant partners -- and we offer delivery for restaurants that don't operate their own service in-house," the spokesperson said. "In both cases, delivery is a significant component of the experience; while diners do have the option of picking up their food directly from a restaurant, most diners choose to have their meal delivered."

Chia also argued in court on Friday that most drivers enjoy the flexibility of the independent contractor set-up, to which the plaintiff's lawyer countered that Grubhub is facing another similar lawsuit involving more than 7,000 drivers.

Much is riding on this trial. It's the first time that a California court has tackled the question of whether the legions of loosely employed workers of the so-called "gig economy" should have a right to W-2 employment status, which would make them eligible for benefits like mileage reimbursements and health insurance. The court's decision could have implications for the rest of the on-demand tech industry as well.

While it may sound brazen, Grubhub's case is not the first time this shape-shifting argument has been used in a bid to shield on-demand companies from expensive labor regulation. Uber argued that it's an “information society services provider” rather than a taxi service when confronted with similar charges.