In these difficult economic times, many businesses seek cost savings by calling certain workers independent contractors instead of employees. It is easy to understand why can be advantageous for a business to use an independent contractor instead of an employee. For example, among other things, there are no associated payroll taxes, the worker may not be eligible for overtime pay, the worker does not receive benefits (e.g., paid time off, health insurance, etc.), which are afforded to employees and the worker may not receive protections under certain employment laws. While these examples may be perceived as advantages, the business faces significant exposure if the worker is misclassified and should have been treated as an employee. The Department of Labor, other governmental agencies with similar enforcement oversight and attorneys have increased their efforts in scrutinizing the relationship of workers. You should consult an experienced employment lawyer before making a classification determination to understand the legal issues and related considerations.
This is not an issue that only affects small businesses – large companies are being affected as well. For example, in September 2015, Uber was named as a defendant in a class action lawsuit in New York State Supreme Court (Ogunmokun v. Uber Technologies Inc.) by drivers claiming they were misclassified as independent contractors. This is just one of cases where Uber is named as a defendant regarding misclassification issues – it also facing claims in California (where it received an initial adverse ruling during the early phase of a case) and Pennsylvania. Unlike individual employment discrimination cases, these types of cases can be devastating for a business because not only do they include a large group of alleged affected workers, they also strike at the heart of a company’s business model and affect their viability. These claims can also lead to investigations by the IRS and other government agencies.
Another industry that has been targeted is on-demand food services. In New York City and other large cities, many companies provide food delivery services and the delivery workers allege that they are misclassified as contractors. Some of companies which are facing claims include DoorDash, Sprig Inc. and GrubHub. As technology develops, new classes of workers are created. It is critical for businesses to evaluate how these new workers will be viewed under the law. These are just a few examples of industries affected – we have worked on matters involving the photography industry, media industry, service providers and many others.
Many companies are under the mistaken impression that if they have a worker sign an independent contractor agreement, they are protected from any claims. That is not true. Indeed, while a signed agreement may be helpful, it is not dispositive. Rather, the government agency or court will focus on the nature of the working relationship between the worker and company. For example, did the company treat the worker like an employee by providing office space and equipment, training, and require a regular schedule. Those are all factors typically found in an employee-employer relationship. So even if there is a signed independent contractor agreement, an employee finding can be made if the above factors, among others, exist.
Before you check off the wrong classification box, contact our office to speak with our Award-Winning NY Employment Lawyer at (800) 893-9645 to learn your rights and options as a worker or learn best practices, compliance issues and related considerations as a business.
Disclaimer: Thank you for visiting our Blog. This blog provides general information and thoughts about various employment law issues primarily in the New York Tri-State area and occasionally in other areas. You are welcome to read the posts. However, do not construe any content on this blog as legal advice or the creation of an attorney-client relationship. Again, we provide the content only for informational purposes. You should not make decisions based information on our blog since the application of the law depends on the facts and each situation may be different. In addition, the law in most jurisdictions is different and changes constantly and we make no representations that any information on our blog has been updated. The Blog should not be used as a substitute for competent legal advice from an experienced attorney in your state or jurisdiction. From time to time, a blog post may discuss a legal case – please note that the post may not contain the most to update information on the case as developments may have occurred after it was created.