When times get tough, everyone is looking for ways to reduce their cost and spend. For some time now, but more so in recent years, organizations have been working to reduce their labor costs and raise their own margins. But how do they go about it? Quite simply, they shift more of the burden, expenses and responsibilities to the employee. However, this kind of maneuver is not necessarily a legal one. While it might cut costs for employers, the employee ends up with less take home pay and having to pay their own expenses to boot!
Cutting costs is the main reason many companies choose to reclassify their employees as contractors.
Companies like Uber and Lyft have been in the spotlight in recent years for suspected misclassification of their workers. Drivers have come together in class action lawsuits, claiming they’ve been wrongfully employed or classified as contractors when they should have been classified as employees. As a result, they end up missing out on the protections and benefits that employees receive.
It’s not just limited to drivers either, but is happening in a range of industries. Instead of hiring as employees, workers are employed on a contract basis.
Some industries to name a few include:
· Office workers
· Call center staff
· Logistical operations
When you add it all up, there’s millions of dollars that should have been going towards compensation and that’s why many workers themselves have filed lawsuits and class action suits, to recover part or all of the lost compensation due to being misclassified as contractors.
2022 Misclassification Lawsuits
Organizations that misclassify their workers can end up being fined by the court and ordered to pay back any owed wages and benefits that were lost because of the misclassification. Fines for misclassification can be costly.
2022 has seen a steady flow of worker misclassification lawsuits. The following lists some of the cases from the year.
· July 7th, 2022, the U.S. Department of Labor’s (DOL’s) Wage and Hour Division (WHD) announced that an Indianapolis, Indiana, security company recently paid $370K in back wages and other damages for federal overtime violations.
· August 2022, final approval was granted for class action settlement against Uber, who were ordered to pay $8.44 million as part of a 2022 class action lawsuit settlement over the alleged misclassification of drivers as independent contractors instead of employees, impacting California drivers.
· Also in 2022 Uber and New Jersey reached an agreement for Uber to pay $100 million to the state due to a disagreement over whether Uber drivers were considered employees or contractors. The case was a result of an audit by the state, as reported by the New York Times.
· Earlier in 2022, the US DOL recovered $867K in owed wages following an investigation that found a Texas restaurant’s history of overtime violations and stealing tips.
· September 26 – The Dept of Labor ordered Philadelphia, Pennsylvania, medical staffing company to pay $9.3M in settlement for an employee misclassification lawsuit The judgement resulted from an investigation finding willful overtime violations.
· October 10 – In settlement of a lawsuit filed in 2019, San Diego City Attorney announced grocery delivery company Instacart to pay $46.5M as restitution to California workers incorrectly classified as independent contractors instead of employees.
· Rover Group Inc, a marketplace for dog-walking and other pet care services, agreed to a litigation settlement of $18 million related misclassification of workers.
· Universal Logistics settled 11 worker misclassification claims, agreeing to pay millions of dollars in backpay to about 66 affected drivers.
Contractor Vetting and Compliance
In response to market demand, CXC developed a world class saas global contractor classification platform, designed to enable corporations to minimize misclassification of workers and ensure correct worker classification and contractor vetting wherever the worker is located.
CXC COMPLY ENABLES:
· interactive contractor vetting
· validation classification for independent or corp.-to-corp. contractors
· assesses a contractor right to work in country
· compliance checks with required insurances and background screenings
ALL IN ONE PLATFORM.
Why is compliance important?
Governments around the world are cracking down on misclassification and have grown wise to the fact that some organizations classify their workers as independent contractors instead of employees, to lower their costs, by not having to pay certain taxes and benefits. See our article How to Engage Talent When Expanding Overseas with examples from multiple countries.
Whether you’re looking to engage a worker domestically in the U.S. or overseas, it’s critical that they’re correctly classified. As we’ve seen in some of the above lawsuits, a simple audit by the Dept of Labor Wage and Hour Department, can expose an organization to potential costly fines. Workers that feel they’ve been misclassified can also bring attention and subsequent scrutiny to your business and how you classify your workers.
Our recent blog post Workforce Compliance Risk & Independent Contractor Compliance Solutions looks at how to manage your contingent workers effectively to protect them and your business from compliance risks.
Book a demo of CXC Comply
If you are concerned about how your workers are classified or minimizing risk to your business, and you should be, book a demo of CXC Comply. Our friendly compliance specialist will be happy provide you with an overview and explain how it works.
CXC has been championing the global contingent workforce since our inception in 1992. Our strong experience in local and international compliance, payroll and other human resources functions for over 30 years makes us a leader in contingent workforce management. Learn more about our end-to-end solutions and let us know how we can help your business be future-ready.