Why Workers Lose When Misclassified as Independent Contractors (And What They Can Do to Fight Back)

Ronald Shephard worked as an installer for Lowe's, a home improvement retailer in California. Lowe's offers customers installation of products bought at its stores. In June 2012, Shephard sued Lowe's in a class action for misclassification, reimbursement and denial of benefits.  The case claimed that Lowe's misclassified their workers as independent contractors rather than employees. As a result, the workers were denied benefits such as health insurance, life insurance, retirement savings plan and workers compensation insurance.

The workers argued that even though Lowe's classified them as independent contractors, they were really employees because the company had the right to control, and did control, all aspects of their installation jobs. The company designated which customers the workers would do installations for. Customers must pay for the installation service directly to the company. The company would then pay the workers. The workers were required to wear Lowe's shirts and hats, and were instructed to identify themselves to customers as Lowe's employees. The company oversaw all the work performed by the workers, and directed what they could or could not do as installers. The installers were prohibited from working for anyone aside from Lowe's.

In August 2013, the installer were granted class certification by the court. Rather than proceed to trial, the parties recently agreed to settle the case for $6.5 million.

Misclassifying workers as “independent contractors” results in companies depriving workers of their rights and protections as employees.  Unlike employees, independent contractors do not have to be paid minimum wage, overtime, or missed break. They are not entitled to benefits such as health insurance, retirement or pension benefits, and workers' compensation protection. There are also no deductions for taxes and Social Security.

Some companies pass on the costs of doing business to the “independent contractors” by deducting them from workers' pay. As a result of misclassification, workers lose money. If the misclassification occurred for several years, the back wages and reimbursements owed may be significant.

Courts look at several factors to determine if a worker is truly an independent contractor. The most important factor is the employer's right to control the worker's manner and means of performing the job.  If the employer dictates how the worker should do the work, what tasks to accomplish and how to accomplish them, then the worker is an employee and not an independent contractor.

“Independent contractors” or “1099 workers” who have doubts about their status should consult with experienced employment attorneys to determine if they are really employees entitled to greater protections under the law.

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