Kaplan Fox is currently investigating claims from workers in the so-called “sharing economy” that work for many app-based companies providing services such as driving, deliveries, pet-sitting and personal errands.  Recently, a number of lawsuits have been filed against companies providing on demand services such as Uber, Lyft, Sprig, GrubHub, DoorDash, and Homejoy alleging that its “independent contractors” are actually employees entitled to wages and other benefits.

The workers in these cases allege that as a result of misclassifying them they have not only lost out on minimum wages and overtime, but have also had to incur business expenses such as gas, tools, phones, and insurance that would ordinarily be paid for by their employer.  Additionally, because these are “1099” works for tax purposes, they have to pay additional amounts for social security and other taxes that are normally paid by the company.  When these employees are let go or get injured on the job, their status as “contractors” can deny them access to important benefits like unemployment, workers’ compensation, and disability payments.

The Department of Labor Warns Companies About Misclassifying Workers

Picking up on this trend in the increasingly tech-reliant workforce, on July 15, 2015 the Department of Labor issued a bulletin reiterating that misclassification of contractors is a problem in an “increasing number of workplaces in the United States.”  The Department of Labor pointed out that misclassifying workers has many costs to the broader to the society, including lower tax revenues for local, state, and the federal government.  The Department of Labor also pointed out that the misclassification of workers is used by businesses to cut costs and avoid compliance with labor laws.  This may be an even greater issue in 2016 has seen many states and cities raise minimum wages.

The Department of Labor’s bulletin outlined the relevant legal standards for determining whether a worker is an employee or an independent contractor under the federal labor law known as the Fair Labor Standards Act of “FLSA.”  Although a host of factors can be considered by a court, some of the key considerations of the FLSA’s “economic realities” test include: (A) the extent to which the work performed is an integral part of the company’s business; (B) the worker’s opportunity for profit or loss depending on his or her managerial skill; (C) the extent of the relative investments of the employer and the worker; (D) whether the work performed requires special skills and initiative; (E) the permanency of the working relationship; and (F) the degree of control exercised or retained by the company.  When analyzing these factors for a worker, the Department of Labor advises that the FLSA is meant to have a broad application to cover as many workers as possible.

Let Us Know If You Think You Are Misclassified

With a new on-demand service startups popping up more and more, the risk that these workers will be misclassified continues.  It doesn’t matter whether the worker is called a contractor, a member, or partner, what matters is the nature of the working relationship with the company.  If you work in the sharing economy as a contractor or and want to inquire about your legal rights, please fill out our contact form, email us at info@consumerrightsfirst.com, or call us toll-free at 1-844-333-7660.