Another in this impromptu series on dangers and consequences of improper worker classification, today’s post examines the fates of ViaSource Solutions, Inc. It is remarkable just how many different ways an organization can conflict with these rules. It is worth the time to review these cases as they are publicized, so that others may compare their own operations and determine if their similar activities may be exposing them to potential fines and sanctions. Here’s today’s object lesson.
ViaSource Solutions Inc., (formerly INW Contact LLC, a company based in Thousand Oaks, California) is a call center provider to businesses marketing products via television infomercials; ViaSource was found to have misclassified the job titles of hundreds of employees. They were charged with denying workers minimum wage and overtime benefits as outlined in the Fair Labor Standards Act (FLSA). The complaint held that workers were being paid by the number of calls handled instead of receiving minimum wage and payment for hours worked above 40 hours per week.
Some of the factors used to determine the workers should have been classified as employees in this case included the following. First, all the workers in question were fully economically dependent on the business. Whether the work represents the sole or primary income for a worker is among the most basic of measures in any IC classification process. In this case, these workers had no other income outside of the work they were performing for ViaSource. Strike One! Moreover, the function these workers were providing was an integral part of the employer’s business. As you may know, workers providing services core to a business’s operations may not be considered Independent Contractors according to IRS rules. Strike Two!
In the settlement announcement issued on April 14, 2016, ViaSource Solutions admitted their error and agreed to comply with the order to reclassify these former IC workers as W2 employees. In addition, the company was compelled to repay back wages of more than $101,000.00 plus an additional $49,000.00 in unpaid overtime.
It is worth noting that because ViaSource Solutions was cooperative with the investigation by the Department of Labor Wage and Hour Division, they were not penalized further, beyond the payment of back wages. Which may give readers the impression that they kind of “got off easy”. However, there are additional negative implications for this organization in the wake of the settlement. For example, the state of California is now within its rights to obtain the settlement information and levy additional fines against this organization should they be so inclined. Same goes for the federal Employee Benefits Security Administration (EBSA), and the Occupational Safety and Health Administration (OSHA). So ViaSource Solutions’ pain may not yet be over. This type of cooperation between state and federal authorities is a newer development and something we covered in a recent blog here.
While this company did themselves a favor by cooperating, they’d have been better off addressing these issues before the authorities became involved. If you suspect that your organization might have misclassified workers, the best course of action is to show a proactive approach to avoiding penalties and fines before it comes to a head (or especially if an audit or investigation should be initiated). Work with a firm like nextSource to apply a strong worker classification protocol. Or consider engaging EOR services to evaluate workers and determine the risks associated with your planned classification scheme. Should a worker represent a high risk, nextSource can provide an EOR solution permitting workers to be on-boarded properly and to avoid fines and penalties. If workers are deemed a low risk, a good workforce management service partner can engage on behalf of your organization; becoming a “pay agent” and providing faster pay cycles to the business. Overall, this provides additional protections to your organization in the event of an audit.