From JDSupra, Richard Reibstein discusses two recent cases which involved claims that customer service representatives were misclassified as independent contractors. Richard writes:
Last month, two key legal developments in the area of independent contractor misclassification and compliance highlighted the risks posed to customer service companies that use an independent contractor business model. The first involves a Colorado company using agents to provide customer support through an app-based platform. The company was sued in a proposed class and collective action lawsuit based on the allegation that the company misclassified the agents as ICs and not employees. The second involves a $3 million settlement between a nationwide customer service support company and the U.S. Department of Labor, which sued the company alleging it had misclassified as ICs the workers that provide customer service to its clients. Many companies in the customer service industry use an independent contractor business model. Workers in that type of trade or occupation usually can be classified legally as ICs under federal and most state laws if their relationships with the companies engaging their services is structured, documented, and implemented in a manner that enhances compliance with those laws. One way some companies have elevated their level of IC compliance is by a process such as IC Diagnostics (TM), a comprehensive system that minimizes IC misclassification liability in a customized and sustainable manner consistent with applicable laws.
In the Courts (7 cases)
CUSTOMER SERVICE COMPANY SUED BY AGENTS UNDER FEDERAL AND COLORADO LAW FOR IC MISCLASSIFICATION. LiveXchange Technologies Inc. d/b/a GigCX Marketplace is an app-based platform for sourcing, recruiting, and managing global on-demand customer experience talent. It engages customer service agents and classifies them as independent contractors. Last month, an agent filed a class and collective action complaint alleging minimum wage and overtime violations under the Fair Labor Standards Act (FLSA) and Colorado state law claiming the agents are employees and not ICs. The complaint charges that, through the company’s app, agents are required to download the company’s proprietary software to their devices, after which the company assigns the agents to customer service job vacancies for the company’s clients. The agents assert they are required to follow the company’s formal written policies and handbook provisions; are not in business for themselves; are subject to significant control by the company, including where and when to work and what attire to wear; do not exercise skill and initiative; do not have the opportunity for profit or risk of loss; are not permitted to assign or delegate their work; have a minor investment relative to the company; and engage in work that is not intended to be temporary or seasonal. Coleman-Jackson v. LiveXchange Technologies, Inc., No. 1:24-cv-01914 (D. Colo. July 11, 2024).
NATIONWIDE CUSTOMER SUPPORT COMPANY AGREES WITH U.S. LABOR DEPARTMENT TO PAY $3 MILLION TO SETTLE IC MISCLASSIFICATION LAWSUIT. A nationwide customer support service company has agreed to pay $3 million to resolve an IC misclassification lawsuit brought by the United States Department of Labor (DOL) in a Florida federal district court. As reported in greater detail in our blog post of July 12, 2023, the DOL sued the company, which provides business process outsourcing, consulting services, and customer support services, including voice, email, live chat, text, social media, and technical support, alleging it violated the minimum wage and overtime violations of the FLSA due to the alleged misclassification of 22,000 service workers as independent contractors and not employees. According to the complaint, the company recruited, engaged, and trained a nationwide group of service workers to provide customer support to the company’s clients through its internet platform, where customer care opportunities are made available to the workers. After an investigation by the DOL’s Wage and Hour Division, the Division concluded that, although the employer often recruited workers with promises they would “be their own bosses” and that they could generate income for themselves by providing customer support services to Fortune 500 clients, the workers allegedly had no real autonomy, were subject to the company’s stringent work scheduling policy, were expected to pay for mandatory training, and had to buy their equipment before providing the company’s clients with service and generating income. A jury trial was scheduled to commence on July 22, but beforehand the parties reached a proposed settlement to compensate the individuals who were allegedly misclassified as independent contractors. The agreement also provides that the company may continue to engage “small businesses that use the [company’s] platform as independent contractors.” Finally, the proposed agreement provides that it “shall not be construed as an admission or acknowledgment of any fault or wrongdoing of any kind on the part of [the company] in any proceeding, whether or not involving the Department of Labor.” Su v. Arise Virtual Solutions Inc., No. 0:23-cv-61246 (S.D. Fla. July 12, 2024).