Misclassifying Independent Contractors: The Costs Add Up

(DGIwire) – When it comes to utilizing independent contractors (ICs), organizations are well advised to pay close attention to federal and state guidelines. The risks of misclassification of ICs can be many, and legal claims can entangle any company—even those that are careful to engage their workers in a compliant manner.

September 2017 saw three court cases that attracted considerable attention in the area of IC misclassification, according to IndependentContractorCompliance.com: an $8.75 million settlement in a nationwide class action against an on-demand delivery service; a non-jury trial before a federal judge in a trial of an IC misclassification claim against a national food delivery company; and a decision sending to trial perhaps the longest-running IC misclassification case in the country against a major national courier.

In the first of these cases, for example, a California federal court preliminarily approved the multimillion-dollar settlement between the on-demand delivery service and its couriers, who made state and federal wage and hour claims against the company alleging the couriers were misclassified as ICs. The couriers, who provide services for the company, alleged that the company failed to pay minimum wages and overtime required by federal and selected state laws, and that the company failed to reimburse expenses under California and Massachusetts state laws.

The second case, notes IndependentContractorCompliance.com, involves a delivery driver who claims that he and other similarly situated drivers were employees misclassified as ICs by the company. The driver claims that he was denied minimum wage, overtime, and reimbursement for business expenses allegedly in violation of California wage and hour laws. In the final case—originally part of a lawsuit brought by many drivers for a different company—a court will examine, on behalf of one remaining plaintiff, whether the company can satisfy one prong of the three-prong Massachusetts Independent Contractor Law, and thus to determine his status as an IC or as an employee.

“ICs can be an employment solution to many companies in all industries,” notes Rebecca Cenni Leventhal, founder and CEO of Atrium Staffing. “But the laws are complex and evolving, so many companies turn to outside experts to help ensure compliance.”

Atrium is focused on providing contingent workforce solutions for mid-size and Fortune 500 companies in nearly every industry. Atrium’s expertise includes regional Temporary and Direct Hire Staffing, national Payrolling Services, national Independent Contractor Engagement and Intern Program Design. The company has extensive experience matching the right candidates for a range of positions within a variety of industries.

“Turning to an external consultant with expertise in navigating the landscape of legalities regarding ICs can be a smart step for any organization,” Cenni Leventhal adds. “At Atrium, we have systems in place to help guide companies that are looking to hire ICs to help satisfy compliance requirements.”