Year in Review: Major Worker Misclassification Litigations in 2021

In 2021, there were a staggering number of independent contractor misclassification lawsuits around the world. In many cases, workers filed lawsuits against their employers for not being classified as employees. 

There have always been cost-effective advantages to hiring workers as independent contractors, but that was until we saw business after business get hit with huge penalties and fines for misclassification. The numbers in the following cases are astonishing.

The major worker misclassification litigations in 2021 demonstrate the need for companies with large numbers of temporary or contract workers to comply with labor laws, and it also demonstrates the need for labor laws that are just, fair, and future-oriented.

Many of these lawsuits are a reverberation of California’s AB5 law and the shadow it casts across the entire country, if not the world. The law requires all independent contractors pass the criteria of the ABC Test. If a worker does not meet all of these criteria, then they are considered an employee instead of being classified as an independent contractor.

In this article, we will look at the many allegations of worker misclassification that arose this year in an attempt to bring to light how increasingly problematic misclassification is for businesses, platforms, and workers all over the world. We will also explain how HR technology is advancing rapidly to help both platforms and workers drive toward a brighter Future of Work.

Major Worker Misclassification Litigations in 2021

Misclassification penalties are costing businesses big time. Over the last year especially, many businesses found themselves facing huge penalties and fines for misclassification. In no particular order, here is a collection of the major worker misclassification litigations in 2021.

Amazon.com Services and it’s Contractor Fined $6.4 Million

In March of 2021, California Department of Industrial Relations reported that California had fined Amazon.com Services LLC and a contractor $6.4 million for alleged wage theft violations against 718 workers.

In an article from the week of the citation, Craig Johnson writes, “The citations total $6,454,110, with $5,304,768 owed to the 718 workers. The amount payable to workers includes $3,377,988 in liquidated damages and waiting time penalties; $762,850 in penalty assessments for not providing proper wage statements; $882,735 for split-shift, meal and rest break premiums; and $281,195 for minimum wage, overtime and contract wages. The citations issued to [the contractor] Green Messengers Inc. include $1,149,342 in civil penalties payable to the state. ”

Court Approves $8.5 Million Settlement for Juicers in Misclassification Case Against Lime

On July 13th, final approval was given by a San Francisco Superior Court Judge to a $8.5 million settlement in a case regarding Lime misclassifying “Juicers”, people who charge Lime scooters, as independent contractors. 

In the words of RBGG’s Grunfeld, this settlement “sends a great message to workers that they shouldn’t settle for these one-sided independent contractor agreements that are in fact employment arrangements that reduce their compensation to below minimum wage, in many instances.”

Holland Acquisition Inc Pays $42.3 Million in Misclassification Case

In October of 2021, after an investigation, the United States Department of Labor announced that Holland Acquisition Inc. will pay $42.3 million dollars in back wages and damages to 700 workers who were misclassified by them from August 2012 to April 2019. The company failed to fully compensate these employees for overtime hours worked plus did not keep accurate records about how much they worked during that time.

Notably, this is not a California litigation. It was the US Department of Labor that dealt with this case.  

DoorDash Agrees to a $100 Million Settlement

DoorDash, Inc. is paying $100 million to settle a number of class action lawsuits for misclassifying delivery drivers as independent contractors. The final approval hearing for the DoorDash Drivers Settlement will take place on November 30, 2021, according to the settlement agreement.

Top Class Actions writes: “DoorDash has agreed to a $100 million settlement benefiting drivers who delivered through the DoorDash app in California and Massachusetts who claim they were improperly classified as contractors.”

Prop 22 Victory Found Unconstitutional

While this example isn’t a class action lawsuit, it’s still a significant litigation that took place in 2021. In November of 2020, companies such as Lyft and Uber breathed a sigh of relief when Prop 22 passed.

Bloomberg explains the Prop 22 victory: “The measure deemed app-based transportation and delivery drivers contractors while providing a limited set of alternative benefits, such as minimum pay for their time on trips but not for their time waiting in between.”

However in 2021, California Superior Court Judge Frank Roesch found that Prop 22 was unconstitutional. Manatt, Phelps & Phillips, LLP explains why it matters: “The long, winding road of worker classification continues to twist and turn in California. The Superior Court’s decision on Prop 22 will be appealed and the question of AB 5’s application to motor carriers may ultimately be answered by the U.S. Supreme Court, should it choose to grant the CTA’s cert position.”

This continuing litigation will be massively influential for the future of the gig economy.

How HR Tech is Working to Help Companies and Platforms Avoid Misclassifying Workers

Not only have we seen an increase in HR-related litigations in 2021, we have also seen an increase in HR technology.

Crunchbase writes, “Venture capital money is flooding the human resources space as employers seek new ways to recruit, hire and retain their workforces. Human resource technologies — which can run the gamut from background checks to benefits and everything in between — already has seen nearly $3.6 billion in venture funding for 260 deals this year, according to Crunchbase data. That dollar amount already surpasses all of last year.”

GreenLight is proud to be one of these venture capital funded technologies. We are the world’s first AI-driven classification engine. Our system uses all of the data and industry knowledge at our disposal in order to classify workers with an exceptionally high confidence interval while making benefits like background checks and worker’s comp easily accessible.

Based on the numbers in these litigations, booking an easy demo with GreenLight could be the most valuable meeting you make this year.

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Alex Steeno

Alex Steeno

Senior industry analyst, adviser of multiple hypergrowth agencies, SaaS, and tech-enabled service platforms, Alex Steeno regularly contributes insights related to industry trends, growth marketing, and management consulting.

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