Class Action Lawsuits and Employee Misclassification
We’ve been reading a recent article in the Guardian about Nike’s possible misclassification of workers, which may result in over $500 million in fines and the possibility of a class action lawsuit. According to this same article, Nike would be joining the ranks of a number of large companies wrestling with the financial consequences that come with worker misclassification. In addition to facing back taxes and fines for misclassifying workers, companies as large and influential as Uber, FedEx, and Instacart are dealing with increasingly frequent class action lawsuits alleging that they have misclassified workers.
What is a Class Action Lawsuit?
You may be wondering, what exactly is a class action lawsuit? A class action lawsuit, according to Cornell Law School’s Legal Information Institute, is a lawsuit in which one plaintiff brings a case on behalf of many others (thousands, in some of the cases named above). The plaintiff has to represent a group, or “class” that all have the same grievance against the same defendant. These lawsuits can be extremely expensive, even when they end up with a settlement. Uber agreed to shell out $8.4 million to settle the 2022 California class action lawsuit against them. Instacart paid $46.5 million to settle the 2019 lawsuit that alleged it misclassified its California delivery workers.
In California, class action lawsuits pertaining to labor code violations fall under the Private Attorneys General Act of 2004, or PAGA. Under PAGA, any individual can file a labor code violation case on behalf of many. This means that any one worker has the ability to represent a group of workers and seek financial reparations and penalties on behalf of the entire group. The more plaintiffs in a PAGA case, the more the potential penalties can increase exponentially. California employers should be aware of PAGA lawsuits and the financial exposures involved.
How Does This Affect Me?
With more employers facing litigation for worker misclassification, now is a very good time to ensure that your own workers are classified correctly! Accurate and compliant classification allows you to rest easy instead of facing the looming specter of fines and lawsuits. Give yourself some peace of mind and brush up on the ABC test for classifying workers in California. Or just ask us!
