2019 saw at least ten multimillion-dollar private class action settlements in the wage-and-hour law arena, along with a couple of multimillion-dollar government settlements. While several of the largest settlements involved California, wage-and-hour cases appear to be becoming more common across the nation. The total value of the top 10 wage-and-hour settlements last year was almost double the total value of the top 10 cases in 2018.
Companies like Lyft, Uber and the like have been using a new model for delivering their services to customers. Instead of hiring employees, they rely on contract workers -- even for their core business. This is often called the "gig economy" model.
The National Labor Relations Board (NLRB) has just overruled a previous case that had expanded the definition of independent contractor for the purposes of the National Labor Relations Act. In its SuperShuttle DFW Inc. decision, the board has brought that definition into greater alignment with the definition used by other agencies such as the Department of Labor and the IRS.
With the "gig economy" in full swing, state and federal agencies have an incentive to scrutinize whether workers are properly classified as independent contractors or employees. After all, employers are not responsible for paying half of an independent contractor's payroll taxes or the unemployment insurance and workers' comp required by law. And, independent contractors lack many workplace protections that employees are entitled to receive.
Some working people prefer the flexibility that comes with being an independent contractor. Many more people, however, prefer the stability that comes with being an employee. Sometimes employers wrongly classify employees as independent contractors. This practice is known as misclassification. Misclassification violates the federal Fair Labor Standards Act (FLSA) and many state laws as well. More importantly, misclassification exploits working people.
Uber, the online ride-sharing company, has become a major player in the transportation industry in recent years. Uber relies on hundreds of thousands of drivers to transport passengers. These drivers are classified as independent contractors, and not as employees. This classification is a major benefit to Uber, as it allows the company to avoid paying drivers overtime and other benefits. This classification also prevents Uber drivers from requesting reimbursements from the company for gas, automobile depreciation and other expenses.
Many companies hire out for independent contractors in order to supplement their workforce and assume that all legal obligations and benefits are dealt with through and by the staffing company which provides them. What they don't realize is that when it comes to certain benefits, the relational status between the staffing company, employer, and independent contractor can sometimes blur the lines that define who is on the hook and to what extent.