Case Summary: Independent Contractor Misclassification Claims Cost Delivery Service $4.6M.
In a class action lawsuit filed in California, Instacart delivery workers alleged that they were misclassified as independent contractors. This case continues a trend of significant settlements by companies that have been aggressive in their approach to the wage and labor laws that govern when a worker is legally considered an employee and when they may be legitimately classified as an independent contractor.
Companies involved in the “gig economy”, as well as very traditional industries such as construction, have tried to classify workers as independent contractors (a/k/a 1099 employees) to avoid the minimum wage, overtime, expense reimbursement, income tax contributions, and certain benefits required by state and federal labor laws.
Avoiding these requirements greatly reduces labor costs and provides a powerful incentive for companies to label workers as independent contractors, even when they know (or should know) that they should be classified as employees. They are knowingly violating overtime pay laws, and they must pay just like Instacart did.
In addition to paying $4,625,000 to settle the workers’ claims, the company has also agreed to make a number of changes to its policies and programs, including making it easier for customers to tip, implementing a formal dispute process for deactivations (terminations) and improve pay statements to make clear how workers are being paid.
Independent contractor misclassification remains an enforcement priority with both state and federal departments of labor – and the core legal issue in hundreds of wage and hour lawsuits nationwide that seek to recover unpaid back overtime wages on behalf of the misclassified workers.
As the Instacart case illustrates, the amount of back wages owed to workers can frequently be in the millions of dollars, and the amounts owed to individual workers can range from hundreds of dollars to hundreds of thousands of dollars, depending on how much overtime they worked and how long they worked while misclassified. Many are shocked at how much they are owed when they calculate how much is owed for unpaid overtime pay.
For more information on the differences in being classified as an “independent contractor” rather than an “employee”, the factors that are considered in making the determination and why the difference is very important to workers, see Overtime Pay Laws for Independent Contractors.“>
Case Summary: An overtime pay lawsuit alleging the improper use of a day-rate pay scheme has been filed in California federal court against Chevron Corporation on behalf of a nationwide class of Well Site / Drill Site Managers. While some were classified as employees of Chevron, many of these workers were classified as independent contractors or “consultants”. All were paid according to a day-rate pay scheme that did not include additional overtime pay, at time and a-half, for hours worked in excess of 40 per week, which is mandated in federal and California overtime pay laws. As is typical for many oilfield jobs, these workers were usually scheduled to work 84 or more hours per week on a 2 week on 2 week off rotation. California day rate laws entitle these workers to receive overtime pay for their hours worked in excess of 40 per week. The case seeks to recover unpaid overtime wages on behalf of all current and former workers employed by Chevron as Well Site Manager, Drill Site Manager or similar positions over the past 3 years who: 1) were paid a set daily rate for each day worked (a day-rate) 2) worked over 40 hours per workweek 3) did not receive overtime pay for hours over 40 per week and 4) were classified as either employees, independent contractors or consultants.
The case is brought under the Fair Labor Standards Act (FLSA), which covers employees in every U.S. state. The FLSA allows workers who have unlawfully been deprived of proper overtime pay to recover up to double their unpaid back wage along with reasonable attorneys’ fees and costs incurred in bringing the case. The statute of limitations under federal law allows for the recovery of wages during the 2 or 3 year period preceding the filing of a lawsuit. Certain states, including California and New York, provide longer statutes of limitations under their state overtime pay laws.
Although the use of a day-rate pay scheme is not prohibited by state or federal wage and hour laws, it does not relieve an employer from the obligation to pay overtime wages to “non-exempt” employees. Most workers who are paid a day-rate do not meet the legal requirements for “exempt” employees – either on the basis of their job duties and/or because they are not paid a guaranteed minimum salary. For more information and a video on how the overtime pay laws apply to day-rate workers and how overtime pay should be calculated for such workers, visit our Overtime Pay Laws for Day Rate Workers page.
The lawsuit alleges that TMAs were regularly required to work 48 (or more) hours per week, however, their compensation did not include overtime pay for the hours worked in excess of 40 each week. Instead, employees were paid only their set day-rate multiplied by the number of days worked during each workweek.
The lawsuit, filed under both federal law and the Pennsylvania Minimum Wage Act (PMWA), seeks to recover damages that include back unpaid overtime wages for the past 3 years, prejudgment interest, double damages on federal law claims and attorneys’ fees.
The lawsuit, brought pursuant to both federal wage laws and the Pennsylvania Minimum Wage Act (PMWA), asserts that the company controlled all aspects of technician’s daily jobs, required them to complete specific paper work and comply with strict policies and procedures. Given the degree of control maintained over the manner, means and methods of work being done, the workers assert that they were improperly classified as independent contractors when they should have been classified as non-exempt employees – and paid overtime. One of the primary factors that distinguishes a true independent contractor from an employee is the amount of control and the right to control the details of how a job gets done.
True independent contractors are not covered by the overtime laws that protect employees – meaning they are not legally entitled to overtime pay. Avoiding the legal requirement to pay time and a-half for all overtime hours is what provides the main economic incentive for companies to improperly classify employees as independent contractors. Additional motivation is provided by not having to provide independent contractors with benefits and/or pay employer side payroll taxes. Not having to pay overtime, benefits and payroll taxes saves a company a tremendous amount of money, often allowing it to undercut and gain an unfair advantage over competitors who comply with the law and properly classify workers as employees.
The lawsuit is on file in the U.S. District Court for the Western District of Pennsylvania as a class / collective action.
Damages sought include back unpaid overtime wages, prejudgment interest, double damages on federal law claims and attorneys’ fees.
A class and collective action complaint was filed against Kestrel Engineering and Kestrel Energy (as joint employers) by a former Inspector who worked in several states (Pennsylvania, Ohio and Texas) and was paid according to a day-rate pay scheme. The case seeks to recover unpaid overtime wages on behalf of all current and former Inspectors employed by Kestrel who: 1) were paid a set daily rate for each day worked (a day-rate) 2) worked over 40 hours per workweek 3) did not receive overtime pay for hours over 40 per week and 4) were employed within the U.S. in the past 3 years.
The collective action is brought under the federal law governing overtime pay, the Fair Labor Standards Act (FLSA), which covers employees in every U.S. state. The class action claims are brought under the state overtime pay laws in Ohio – the Ohio Minimum Fair Wage Standards Act and the Ohio Prompt Pay Act and under the state overtime pay laws in Pennsylvania – the Pennsylvania Minimum Wage Act. These two claims cover all Inspectors who performed work for Kestrel in Ohio and/or Pennsylvania.
Although the use of a day-rate pay scheme is permitted by law, it does not relieve an employer from the obligation to pay overtime wages to “non-exempt” employees. For more information and a video on how the overtime pay laws apply to day-rate workers and how overtime pay should be calculated for such workers, visit our Overtime Pay Laws for Day Rate Workers page.