For some companies, labeling employees as independent contractors has not turned out to be such a great money-saving idea after all. Some companies will do anything to save themselves a buck, even if it harms workers and violates state and/or federal law. This appears to have been the case for CMI Transportation, K&R Transportation California, and Cal Cartage Transportation Express, all subsidiaries of NFI Industries,
Claims in the Case
According to court documents regarding these port-trucking companies,workers were classified as independent contractors, and were then hired to get products transported. This saved the companies a boatload of money, but how?
The Cost of Doing Business
The Bureau of Labor Statistics determined that wages account for roughly 70% of employee compensation, while benefits take up the additional 30%. So, if employers can avoid benefits that are mandated by law, such as Social Security, unemployment insurance, workers’ compensation, and Medicare, they can really make out well. Additionally, they never have to go to the bargaining table to discuss issues like vacation pay, sick pay, pensions, paid leave, and the like.
Employees or Independent Contractors?
With the huge savings associated with hiring independent contractors, why does every business not label workers that way? The fact is that making such determinations is not a matter of personal choice. There are legal questions to consider. Answering yes to one or more of these questions likely means workers are employees, deserving of all benefits the law dictates:
- Is the business reliant on the work in order to do business? Someone who lays carpet in a department store is not essential to daily business operations, whereas clerks and warehouse workers are.
- Is termination without cause a right of the employer? If so, the worker is not an independent contractor who can only be terminated only if the terms of the contract are violated.
- Is the worker considered to be semi-skilled or unskilled? If so, they are the target audience for protections by the California Unemployment Insurance Appeals Board.
- Did the employer train the worker? Independent contractors usually provide a service for which they are already certified.
- Is the worker expected to provide his or her own supplies for the job? Employers do not generally provide tools and such to independent contractors.
Independent Contractors and the Consequences of Misclassification
In California, there is a big price to pay when employers intentionally misclassify their workers. In one case, a judgment for $13 million was won when janitors were misclassified as independent contractors by a couple of companies. What will happen in the trucking lawsuit remains to be seen.
If you believe your employer is trying to save money by cheating you out of the well-deserved benefits you are entitled to by law, the experienced legal team at Beck Law can help. If you work in Sonoma County, Mendocino County or Lake County California, contact us today in Santa Rosa for a confidential consultation.