Contractor status lets companies reduce pay
CHICAGO — Truck driver Lucio Barrera said he didn't think twice about signing a contract in 2013 with DNJ Intermodal Services, even though it barred him from using his truck to do business with other companies and he had to use and pay for DNJ's communication and tracking systems.
Barrera said he started having doubts about the arrangement last year, when he got paychecks that showed zero earnings. Barrera said DNJ was deducting costs for repairing, towing and storing his 1996 Freightliner semitractor-trailer truck. In January, the company seized the truck for back payment and told Barrera his services were no longer needed, Barrera said.
In June, Barrera, 41, of Chicago, filed suit against DNJ in federal court in Chicago, claiming the company imposed so much control over him that he should have been classified as an employee, not an independent contractor. Barrera said in his suit that he believes 50 to 100 other drivers “suffered the same type of economic damages as a result of DNJ's practices and policies.”
DNJ, a unit of Memphis, Tenn.-based IMC Cos., declined to comment.
Worker advocates say misclassifying workers as outside contractors is a growing issue in Illinois despite a 2008 law aimed at cracking down on the practice. The Employee Classification Act says workers are automatically considered employees unless they pass several tests, including being free from control or direction of the company while performing a job. The law mainly targeted the constructionindustry, defining construction broadly to include everything from painting and decorating to landscaping and transporting materials.
It's difficult to know the exact number of misclassified workers nationwide, but state-level studies show that between 10 and 20 percent of employers misclassify at least one worker as an independent contractor, said a report published in June by the Economic Policy Institute, a labor-oriented think tank based in Washington. Studies also show the practice has been on the rise since the 1990s and is more prevalent in industries where workers' compensation insurance is high and rising, like construction.
The practice of subcontracting work to companies who, in turn, also subcontract apparently has made it easier for misclassification to occur. “Misclassified workers can now be found in almost every sector of the economy, working for small companies to publicly traded multinational corporations,” the report said.
Adam Kader, director of Arise Chicago Worker Center, said that in the last two years the center has seen an increase in the number of service sector workers hired as independent contractors. Most recently, restaurant delivery workers and a dishwasher sought the center's help in collecting wages they believed were owed to them. One worker's weekly pay came to less than $8.25 an hour, the Illinois' minimum wage, Kader said. Employers, he added, usually say their actions are legal because the workers are independent contractors.
Truck driver Barrera unsuccessfully tried to file a police report about the confiscation of his truck, which cost him $16,000 in 2013 and is critical to him being able to get work, he said. Then he went to Arise Chicago, which connected him with Alejandro Caffarelli, the lawyer who filed Barrera's suit.
Caffarelli said he believes companies misclassify employees to avoid paying payroll taxes, unemployment insurance, workers' compensation insurance and overtime. They also don't contribute to Social Security or Medicare. In essence, Caffarelli said, employers shift the cost of doing business to workers.
“The employer reaps all the rewards,” Caffarelli said.
Consider a case involving Super Maid, a Chicago-area cleaning company, which treated its maids as independent contractors and paid them a flat rate per house cleaned regardless of their hours on the job or travel time between assignments. The U.S. Department of Labor sued the company, arguing the maids were not independent contractors because Super Maid set schedules, assigned clients and required noncompete agreements, which meant the maids couldn't clean houses on their own time. Moreover, the company installed GPS to track workers' movements.
Last year, U.S. District Judge John Tharp agreed with the Department of Labor. In his opinion and order, Tharp wrote that the record “more than adequately” showed that the company exerted “significant control” over how the maids do their work, making them employees of Super Maid. He ordered Super Maid to pay a total of $184,505 to more than 50 maids, a figure that included more than $92,000 in unpaid overtime and minimum wages.
Unions say misclassification of workers is a way companies thwart organizing because independent contractors are not protected by the National Labor Relations Act. Last year, the National Labor Relations Board ruled that while in theory FedEx Home Delivery drivers in Hartford, Conn., are independent contractors, in practice they are employees and that the company broke labor law by refusing to recognize and bargain with the Teamsters union.
Other cases making their way through the NLRB involve Uber and Lyft drivers who say they are employees, not independent contractors, and that the companies engaged in unfair labor practices. One Lyft driver in Chicago alleges being retaliated against for participating in union activities, according to a complaint filed with the NLRB's regional office.
Uber is facing lawsuits from drivers in California who say they should be classified as employees. In an unrelated case, the state's labor commissioner ruled in June that a driver who worked for two months was an employee and awarded her more than $4,000.