Misclassification of Workers - Proskauer Rose LLP
© 2010 Proskauer Rose LLP MISCLASSIFYING WORKERS AS INDEPENDENT CONTRACTORS: THE PRICE OF INDEPENDENCE Mark W. Batten Member of the Firm, Proskauer Rose LLP Elise M. Bloom Member of the Firm, Proskauer Rose LLP Fredric C. Leffler Senior Counsel, Proskauer Rose LLP I. SCOPE OF THE MISCLASSIFICATION PROBLEM A. WHY IS THIS RELEVANT? 1. Lawsuits alleging improper classification of workers as independent contractors are on the rise, and employers are spending significant time and expense defending them. Litigation will continue to grow as federal and state government agencies increasingly scrutinize the independent contractor model. 2. Worker misclassification lawsuits – including individual, collective and class actions – are hitting every sector and industry, including construction, insurance, financial services, grocery and parcel delivery. If a plaintiff proves that an employer acted intentionally, treble or punitive damages can apply. 3. The recent surge in worker misclassification litigation requires employers to not only understand the law and its implications, but to also develop innovative defenses against these suits. Counsel for employers must also craft effective settlement strategies to minimize the time and expense of litigation. B. HOW MANY WORKERS ARE REPORTED AS INDEPENDENT CONTRACTORS? 1. In 2005, the Bureau of Labor Statistics reported that there were 10.3 million independent contractors, which represented 7.4% of the workforce. 1 1 Contingent and Alternative Employment Arrangements February 2005, U.S. Dept. of Labor, Bureau of Labor Statistics, July 27, 2005, available at http://www.bls.gov/news.release/conemp.nr0.htm (last visited on March 21, 2010).