Worker classification is complicated and can be very costly when you get it wrong.  All too often employers try to go it alone and navigate the rules. The end often results in a sizeable payout and bad publicity.

Cintas Corporation blames the union citing the suit was merely its way of pressuring it to allow worker unionization. The union’s opinion “After six long years of delay tactics and needles posturing by Cintas, drivers will finally receive just compensation for overtime work,” said Workers United’s president, Bruce Raynor.

Looks like Larry the Cable Guy has company. Communications companies are being bombarded with worker claims of unpaid overtime , worker misclassification and unlicensed workers. Joseph Valdez, cable installer filed a lawsuit against several cable giants claiming he was cheated out of unpaid wages. Attorneys for the plaintiff have accused the cable companies of worker misclassification and unpaid overtime. The overtime claim is not warranted in a case where the workers were hired as independent contractors. Is this a clear cut case of employer intentional misclassification paying the workers as independent contractors to avoid employer obligations? Perhaps it’s a simple case of misinformed cable companies duped by its sub-contractors providing the installers. Often a company finds itself in the middle of a legal dispute due to ignorance of the subcontractor’s actual relationship with its workers. These companies enter into an arrangement with the subcontractors under the impression the workers are paid as employees after all the contract prohibits them from supplying 1099 contractors. The unsuspecting company is totally unaware of any misconduct. Typically an organization will engage a subcontractor and assume they operate a legitimate business.  Only when a worker files a complaint against the subcontractor do they become painfully aware of a bad employment arrangement and stuck in the middle of a hellish nightmare!

In June a former cable installer filed suit against RCN Corp. claiming he was an employee and not an independent contractor. Fritz and more than 1,000 other U.S. installers are paid as “independent contractors and recognize this arrangement has ripped them off for years.  They claimed they have been deprived of overtime and other employee benefits enjoyed by RCN employees.

An unsuspecting business can sidestep these types of legal problems by taking time to run a thorough check on its subcontractors. A couple of phone calls and a few hard hitting questions about its hiring practices may turn out to be time well spent! 

Employers required to withhold 3 percent of independent contractor wages to help balance state budget.

California officials are pushing for mandatory withholding of taxes from all wages paid to independent contractors. Governor Schwarzenegger failed to endorse the proposed budget last week due to an unrelated issue but nonetheless the money must start flowing in soon.  Where is it going to come from?  If the state has it’s way it will come in the form of a taxation on a group not accustomed to being subjected to automatic taxation. The announcement and push has many employers baffled and contractors fuming. As the plan increases the number of adopters and continues to gain momentum those likely to be impacted are scrambling to shut it down before it ever launches.  

The California Association of Realtors (CAR) is fired up over the legislation stating it unfairly singles out independent contractors and forces this group to bear the burden of the state’s budget debacle.  However the state claims this shadow workforce is part of the root cause for its shortfall.  The change would generate about $2 billion in one-time funds for the fiscal year 2009-10 and ongoing will generate compliance revenues of more than $130 million per year.

The taxation idea has the support of state Sen. Leland Yee, D-San Francisco/San Mateo but not everyone agrees with Yee’s position on the move.  Assemblyman Jerry Hill, D-San Mateo and Belmonts Chamber of Commerce Governmental Affairs Committee Chairwomen Mary Morrissey Parden called the move “creative accounting” and characterized it as ‘financial shenanigans”.

A move which clearly pierces the employer veil. What once were clear lines of delineation of contractor versus employee are quickly begining to fade…

Last week Minneapolis based Michelle Drake, attorney for a troupe of strip club dancers, filed suit against a strip club in federal court.  Drake claims this s a clear case of worker misclassification and in violation of both state and federal wage and hour laws. Drawing similarities between the strippers and hair stylists citing the only difference between the two ”the stylist is considered an employee and gets a wage, whereas the dancer is forced to work only for tips and “pay for the pole. Drake is demanding the same protections for her clients automatically supplied to hourly employees. 

All workers deserve protections from opportunistic employers who take advantage of unsuspecting employees. This case is certainly interesting when applying the smell test and control factors to determine worker status. Several characteristics of an independent contractor are present and perhaps the culprit. Renting a pole or a chair, freedom to choose the costumes/uniform of the day or night and payment at the end of the job may have been enough for the employer to decide to pay as freelancers. Although similar cases have been filed and won by dancers in California, Alaska and Texas this industry continues to operate outside the laws.  Legacy industry standards are often difficult for some employers to abandon especially when the service offering is as lucrative as this. With no regulation or industry watchdogs worker violations can easily be overlooked or simply missed.

Employers must remember to exercise caution when classifying workers. Evidence of control of a worker regardless of execution can result in an unfavorable outcome. Although no evidence an employer ever exercises control, the mere fact the right to control exists can be enough to reclassify to employee status.

At a time when the retail industry is losing its choke hold on the average fashonista/shopaholic aka the American consumer trendsetter H&M workers received a pay hike instead of a pink slip. This news is a refreshing change from the regular reports of economic doom and gloom making headlines every evening.  However the news of a pay hike does not come without a hitch. 

Last month Union leaders negotiated wage increases and other benefits for more than 1,000 workers at H&M clothing stores in Manhattan. The package H&M workers received comes complete with a guaranteed 3 percent pay increase the first year, wage negotiations the second and third year and a provision for extra, merit-based increases each year. On top of that the contract calls for a union representative on site every day to remind employers it’s a new era. The Union is hailing this victory as an example of the power of collective bargaining. Retailers won’t be on this celebratory gathering attendee list I guarantee it!

The win comes at a time when Congress and President Obama are under tremendous pressure to back the proposed Employee Free Choice Act (EFCA) legislation. If passed union representatives have vowed to increase its membership in the U.S. by 20 percent each year.

The H&M uion win is clearly just the shot in the arm union leaders needed to encourage all workers to hang on. Just when it looked as if the EFCA bill was about to die on the vine the union showed up and watered it…