Misclassification of workers continues to be a headache for employers, with a judge recently approving a $6.5 million settlement of a class-action lawsuit brought by home improvement contractors against Lowe’s Home Centers.
The plaintiffs in the case performed renovation services for Lowe’s customers including installing kitchens, appliances, bath and plumbing fixtures, windows and doors. Lowe’s classified them as independent contractors but, according to the suit, they were actually employees because the company controlled all aspects of the installation jobs.
Lowe’s disclosed the settlement — which will pay an average of $1,500 per class member — in June and a federal judge approved it earlier this month.
The Lowe’s settlement highlights some “key lessons every business should consider when working with an independent contractor,” according to the founders of Work Market, which provides freelancer management solutions to companies.
Among other things, Jeff Wald and Jeffrey Leventhal said in a post on Forbes.com, working with a business entity such as an LLC “does not automatically eliminate your misclassification exposure.” The Lowe’s plaintiffs included installation contractors who operated in the form of a business entity.
The post also notes that the largest, most prosperous businesses “are just as susceptible to labor violations as their small and mid-size counterparts” and independent workers “are playing a critical role in the growth of some of today’s biggest brands.”
Workers at Google and Uber who were classified as independent contractors have recently filed misclassification suits while FedEx settled a similar case for $5.8 million.
“Fines levied by the IRS and State Labor Departments for worker misclassification can exceed millions, if not tens of millions of dollars, depending on the severity of the infractions,” Wald and Leventhal said. “The threat of class-action lawsuits … should also serve as a further deterrent for companies straddling the boundaries of improper classification.”
Featured image: Thinkstock