Across the country, there are more and more examples of businesses facing legal consequences because they were misclassifying workers as independent subcontractors when, by law, those people should have been treated as employees and compensated as such.
As Construction Citizen has documented over the years, there are many legitimate uses of contract labor. There is also, however a scourge of certain employers abusing the designation to dodge taxes, health benefits and other costs associated with having employees on payroll. Misclassification happens when a business intentionally uses contract labor to gain an unfair competitive advantage.
This can all be very difficult to navigate but courts are starting to provide more clarity about who can and cannot be classified as contract labor.
Writing for JD Supra Business Advisor, Wesley Covert pointed to two cases in which employers were on the losing end in court over misclassifying employees. The first case was about delivery drivers in the Midwest:
“In Arunin v. Oasis Chicago, Inc., a federal judge in the Northern District of Illinois held that delivery drivers for a company that operates restaurants in the Chicago area are entitled to unpaid wages because they were misclassified as independent contractors under the FLSA and Illinois Minimum Wage Law.
Even though the workers maintained and drove their own vehicles, the court determined that the workers qualified as employees, rather than independent contractors, under the six-factor test utilized by the courts for analyzing employee status.
Specifically, the court held that the company concluded the tasks to be performed, set schedules and payment, withheld tax obligations from credit card tips, and had the right to control the plaintiffs’ work by requiring them to perform additional work for the restaurants, in addition to delivering food.”
Another case involved a company agreeing to pay out $16.5 million to settle allegations of worker misclassification in Ohio. The case was called Snodgrass v Bob Evans Farms, LLC:
“The plaintiff class, comprised of 1,566 assistant restaurant managers, claimed that they performed manual tasks, such as cooking, washing dishes, and running the cash register, instead of overseeing other employees. By not performing “supervisory” tasks, the plaintiffs alleged that they were owed overtime because they did not meet an exemption from overtime criteria under the FLSA. These two cases should place employers on notice that worker misclassification litigation and enforcement is prevalent and costly and deserves every employer’s attention.”
Construction Citizen will continue to track the issue as it's dealt with in the courts and elsewhere.