Class Action Suits: Another Potential for Payout

Intensified Spotlight on Contractor Misclassification

Be sure to check out the article featured in CNN Money today regarding independent contractor misclassification and the related crackdown. The article forecasts the eminent audits and governmental attention the issue is receiving.  The article however does not delve into the dangers of class action lawsuits – a potentially devastating side effect of misclassification.

Another Pitfall of Misclassifying Workers

While audits are both distracting and disruptive to businesses, class action lawsuits have the potential to become more costly, both in terms of dollars and image.  As class action lawsuits play out in court, they receive a great deal of media attention and scrutiny from various audiences (take the FedEx suit for instance). The related court proceedings may last for months or even years.  Even with a favorable outcome, this type of suit is not productive for business.  Add labor unions (with their interest in workers being dues-paying members) to this mix and you are in for one compliance cocktail that may be difficult to swallow.

The Usual Suspects To Share Scrutiny Soon

For now, the main spotlight appears to be in the construction and transportation related industries, including cable installation and trucking.  If you operate a business which relies on drivers, chances are you have caught wind of this.  This is not to say any industry is safe.  Misclassification cases have been seen throughout nearly every industry from baby gear manufacturers to adult entertainment venues. Clearly, given the FY11 budget and section 9006 of the recently approved healthcare bill, the government intends to expand enforcement.  I personally foresee a rise in both misclassification and wage and hour claims within the healthcare and IT industries within coming years.

Be sure to read the section on freelancers, an often controversial and murky topic for contractor classification.  What are your thoughts on freelancers with regard to contractor versus employee classification?  Your comments are welcomed below.