They paved paradise and put up a parking lot.
When Joni Mitchell wrote “Big Yellow Taxi,” she had just arrived in Honolulu. She was inspired by the view outside her hotel window, with beautiful green mountains in the distance and, closer to the hotel, a “parking lot as far as the eye could see.” Ugly.
For business owners, the beautiful green mountains are successful business operations, with the business having been built the way you wanted and cultivated over a number of years. Paving over that paradise with a parking lot is the government coming in and forcing you to change how you do business. Ugly.
That’s what is happening to companies that rely on independent contractors but aren’t deliberate enough in how they set up their IC relationships. Looking back at 2024, here’s what I mean, with two specific examples.
Two companies with nationwide operations were forced to convert all independent contractors to employees, at least those working in California.
WorkWhile and Qwick provide gig workers to fill empty shifts. Qwick operates in the hospitality industry, and WorkWhile operates across multiple fields, including manufacturing, hospitality, and general labor.
The companies treat the gig workers as independent contractors. The City of San Francisco sued each company on behalf of the State. The lawsuits alleged that the gig workers were misclassified and should have been treated as employees under California law.
In 2024, both companies settled. Each agreed to pay a seven-figure settlement and to reclassify all gig workers as employees. (Press releases are here and here.)
Before the lawsuits, both companies had operated their businesses this way for years. They didn’t get sued and didn’t have to reclassify the contractors — until they did.
This case is a good reminder of two important rules.
1. Just because you have been doing it this way for years doesn’t mean it’s lawful.
2.The fact that you haven’t been sued means only that you haven’t been sued yet.
Before the lawsuits were filed, the companies had options.
They could have been proactive about changing the facts of the relationships and the contracts. They could have molded the facts the way they wanted without government oversight, in a way that would better insulate them from misclassification claims. This would have been difficult in California, with its strict ABC Test, but not impossible. But it would have taken hard work and a willingness to make changes proactively.
Or they could have converted their contractors to employees, but done it on their own terms, without the government telling them how they have to operate their business.
Now, as part of their settlements, these companies are forced to allow the government to monitor and dictate how they interact with these workers.
Don’t it always seem to go / that you don’t know what you’ve got ‘til it’s gone?
Once the government is monitoring how you do business, you’ve lost the flexibility to adapt and build on your terms. It’s too late. The time to act is before you get audited, investigated, or sued. See Rule #2.
© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.
