Specifically, the lawsuit focuses on the following “facts:”
- The third-party “labor broker” did not keep any records of any evidence supporting its classification of its workers as independent contractors;
- The Florida company exercised significant-if not total--control and direction over labor broker workers. While these workers were called “independent contractors” of a labor broker, the freedom of control that true independent contractors possess was entirely absent from the working relationship.
- The Florida company exercised control over labor broker workers in virtually every aspect of their workday, including:
(a) dictated the number of workers the labor broker supplied to the worksite;
(b) unilaterally set the work schedule that workers were required to adhere to, including determining the break times for the workers;
(c) required workers to wear company uniforms, bearing the company logo, and provided the vast majority of tools and materials;
(d) set policies that workers were expected to follow;
(e) closely supervised the workers’ work product before, during, and after a task’s completion on a daily basis (rather than simply evaluating the workers’ finished work product, the company oversaw and guided the work on a daily basis, providing instructions to workers on how to complete the tasks);
(f) had the power to direct a labor broker to hire a specific worker; and
(g) even had the power to directly terminate a worker from a worksite without consulting the labor broker at all.
This lawsuit reminds other Florida companies that there is a significant cost to improperly classifying a worker as an independent contractor. This lawsuit alleges that the company cheated multiple workers out of their hard-earned wages and stripped them of their legal rights. The lawsuit is seeking tens of thousands of dollars in damages, along with unpaid taxes and fines for every worker misclassified.
This recent case sends a message to Florida business owners - pay your workers fairly, or there will be consequences.
If your Florida business would like to have an experienced employment law attorney review your classification of workers, you may contact our labor and employment law firm by email or call us at 1(772)465-5111.
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Here is a recent scenario:
A Florida company decided to have its work performed by workers obtained through third-party “labor brokers,” whose sole business purpose is to hire workers and send them to the Florida company’s job sites. These workers never appear on the company books, and are instead listed as “independent contractors” on the labor broker’s payroll. This maneuver allows the company to slash costs, because it is avoiding taxes and costs associated with “employees.” Because the workers are classified as Florida independent contractors, rather than employees, the company took the position that the workers were not entitled to benefits that they would otherwise be entitled to as employees, such as workers’ compensation, paid sick leave, minimum wage, and overtime pay. This resulted in such a massive savings, that it allowed the Florida company to dominate its competitors, who simply could not compete with the prices charged by the company that had suppressed its costs.
Many Florida business owners read the above “facts” and wonder, is this legal? Can my Florida company switch from employees to independent contractors and save money? Can we just call the person a 1099 worker?
Well, maybe, in some situations. This scenario involves both the Department of Labor and also the Internal Revenue Service, each of which have their own test to determine whether a workers should be classified as an employee or independent contractor. It is beyond the purpose of this article to go into detail about the difference between an employee and an independent contractor, but in general, classification focuses on the degree of control and independence of the worker.
The “facts” listed above in the first paragraph of this article were taken from a recent complaint filed in a court where an Attorney General decided to sue a Florida company for allegedly misclassifying workers as independent contractors.
According to the lawsuit, the third-party “labor brokers’” payroll records indicate a systemic failure to pay overtime, where a worker worked in excess of 40 hours in that workweek and was not paid 1.5 times their regular wage. Also, the payroll records indicate a systemic failure to pay minimum wage. For example, the payroll records indicate that workers were paid more than the federal minimum wage, but less than the required minimum wage. As a reminder, Florida’s current state minimum wage rate is $8.25 per hour, which is greater than the Federal Minimum Wage of $7.25. Most employees in Florida are entitled to be paid the higher state minimum wage.
The lawsuit claims that this is a case about worker misclassification - a form of payroll fraud that occurs when a company fraudulently classifies its employees as independent contractors in order to reduce costs.
The lawsuit alleges that the workers really should have been classified as “employees.” In doing so, the lawsuit focused on the control over the workers, namely that a handful of managers exercise immense control over these workers-the managers have the power to set the work schedule, hire and fire, and impose continuous instruction and oversight.
Florida companies are misclassifying employees as independent contractors. Is your business doing this?