The nextSource Blog reports on two cases in which the United States Department of Labor (DOL) prosecuted companies for misclassifying workers as independent contractors. The blog reports:
The Wage & Hour Division of the US Department of Labor has recently prosecuted two notable cases against companies using independent contractors in ways the DOL deems inappropriate. The definition of an IC is hotly contested lately with so many new and innovative business models testing the boundaries of what was once a fairly settled issue. With so much ambiguity injected into the operating environment, it is a worthwhile activity to review each case as it is handed down, to understand how the regulations might be equally applied to your own organization’s IC workforce. Here are the two recent instances. Take from them what you will.
NCCI, National Consolidated Couriers, Inc., is a California-based company recently investigated by the USDOL’s Wage and Hour Division for potential misclassification of independent contractors. It was found that 600 of NCCI’s couriers were misclassified as independent contractors as part of the company’s strategy to cut costs and not because they met the standard put forth by IRS regulations. NCCI was fined $5 million in back wages and damages for failing to pay minimum wage and overtime.
In another unfortunate episode, Stanford Yellow Taxi Cab was investigated and found to be violating the IC classification regulations. According to investigators, Stanford Yellow Taxi exhibited basic employment controls which typify the W2 worker classification, requiring workers to work six days a week in twelve hour shifts. However, workers were not compensated for all hours worked. Further, workers were not allowed to change schedules or operate independently by reaching out directly to customers. In addition, a company dress code was enforced which also weakens the company’s argument that these workers were ICs. Making matters worse, the DOL had to file suit to stop the company from threatening and intimidating workers who were cooperating with the investigation.
In the end, Stanford Yellow Cab was liable to pay $3 million in fines for back wages and damages to dozens of drivers (including one that was fired days before the trial in attempts to prevent his testimony).
Read the full story at Wage & Hour Division Sends Strong Message to Companies Using ICs
