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Labor lawsuit highlights misclassification trend woes

Over the past several years, disturbing trends have emerged within a specific area of employment law. Many employers, eager to cut costs, unfamiliar with relevant law or both, have begun to misclassify workers. When part-time or full-time workers are misclassified as independent contractors, employers save on certain wages, benefits and tax-related costs. Although some workers are correctly classified as independent contractors, others are suffering due to incorrect misclassifications.

A number of wage and hour disputes have been filed as a result of these misclassification trends. Most recently, the startup cleaning and home repair business Handy has become the subject of one such dispute. Like Uber, Lyft and Postmates, Handy hires independent contractors as opposed to workers classified as part-time or full-time employees. Due to a number of factors, Handy is being accused of misclassifying these workers.

The Internal Revenue Service indicates that the major difference between employees and independent contractors. This difference is essentially that employers must “must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid” for employees, though they need not do so for independent contractors. In addition, employees are generally granted broader rights to leave, overtime pay and benefits than independent contractors are.

Whether Handy is indeed guilty of misclassifying its workers is a matter yet to be decided. However, the business’s situation highlights the prevailing nature of misclassification issues within the American workforce and the need for a crackdown on these illegal practices. Without such a crackdown, this situation is unlikely to resolve on its own.

Source: Business Insider, “Two Workers Are Suing A Cleaning Startup Called Handy Over Alleged Labor Violations,” Business Insider, Maya Kosoff, Nov. 12, 2014

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