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Grubhub Shows First Impact of California’s New Gig Law

In November 2020, California voters approved Proposition 22, which cemented the independent contractor classification for gig workers. Under the new law, drivers for apps such as Uber, Lyft, DoorDash, and Grubhub receive certain limited benefits to be provided by the company. These benefits are much less than what the drivers would be entitled to under an “employee” classification.

In response to the new law, Grubhub altered the “tip” option on its app. Previously, the app included a default tip of 20%. Grubhub changed the default amount to zero, with a note beside it that users may “leave an optional tip on top of driver benefits.” Grubhub automatically charges customers a $1.50 “benefit” fee that will go towards the benefits written into the new law. The benefit is a healthcare stipend if the drivers clock a certain number of hours. Only a limited number of drivers will qualify for this benefit, and they must be the primary policyholder on their existing healthcare plan. Uber provided data showing that only 2/3 of its drivers would qualify.

Grubhub drivers quickly expressed their frustration with the company, pointing out that the new benefits are “not nearly high enough to compensate for encouraging no tipping.” A recent study showed that tips account for approximately 30% of a driver’s earnings. One Grubhub driver shared that there has been a dramatic reduction in the tips she has earned since Grubhub removed its recommended tip. Uber and DoorDash indicated their intention to raise fees to cover the new benefits.