$1.3 Million Reasons to Check Your Compliance

Two States Crack Down on Staffing Violations, Sending A $1.3 Million Warning to Employers

As summer comes to a close and the weather starts to cool, compliance issues and misclassification fines refuse to follow suit. Massachusetts and the District of Columbia just handed down a combined $1.3 million in settlements against staffing firms and a client company accused of wage theft, denied sick leave, and worker misclassification. The cases offer a clear look at what happens when companies treat workforce compliance as an afterthought.

In Massachusetts, four staffing agencies and hotel operator Gulph Creek Hotels will pay close to $900,000 after an investigation found violations tied to minimum wage, overtime, sick leave, and worker classification. More than 400 workers were affected. One of the staffing firms, All Star Hospitality, misclassified 134 workers as independent contractors rather than employees, a mistake that kept those workers from protections and benefits they were legally owed.

“Every worker in Massachusetts is entitled to be paid the wages they rightfully earn,” Attorney General Andrea Campbell said in announcing the settlements. Her office was direct about the intent behind the cases: put employers on notice.

In DC, First Impression Staffing will pay $250,000 to workers and $150,000 in penalties for not providing paid sick and safe leave from 2022 to 2025. Safe leave, which covers time off for matters like domestic violence or stalking, is a legally required benefit in many states. The company also failed to give employees the required written wage notices.

Worker misclassification often gets treated as a “later” issue until it’s too late. These cases show how fast costs can add up, and financial penalties are just the start. Back pay, legal fees, and public enforcement can damage your professional reputation which can take years to rebuild. If you manage both employees and contingent workers, classification errors often happen when you move too fast without the right systems in place.

A good workforce management partner helps you avoid these risks and protects your bottom line. The right partner puts processes and oversight in place to prevent worker misclassification and protect the reputation you worked hard to build. That protection costs far less than a settlement.

If you don’t have a workforce management partner, or you’re unsure whether your current one is doing the job, reach out to us today:

[email protected].

CALIFORNIA REGULATORS SET SIGHTS ON GIG ECONOMY DATA PRACTICES

California’s privacy watchdog is turning its attention to the gig economy, and the platforms that power it should be paying close attention.

The California Privacy Protection Agency, known as CalPrivacy, has announced its first formal audit under the California Consumer Privacy Act. The target: app-based transportation, delivery, and task platforms that rely on independent contractors to run their businesses.

Since the CCPA took effect, CalPrivacy has focused largely on writing rules and guidance. This audit marks a shift toward the agency checking whether companies are actually following the rules that have been set.

What’s driving the scrutiny

Gig platforms collect a large amount of information about the people who work for them. According to CalPrivacy, that includes precise location data tracked in real time, performance and behavior metrics, biometric identifiers, financial records, and even communications sent through the app.

Data collection is no new issue, but in this case, platforms feed this data to algorithms that may impact consequential decisions, including how much a worker earns and whether that worker gets suspended or removed from the platform altogether.

Sabrina Ross, CalPrivacy’s chief privacy auditor, says this is exactly why the audit matters.

California’s privacy law gives people the right to see and understand what companies know about them. For gig workers, Ross argues, that is not only about privacy, but being able to access information that “may directly impact their livelihood.”

This is important because a worker can’t challenge a decision made by an algorithm if they have no way to see the data behind it. If a platform cuts someone’s pay or removes them, the worker needs access to the information that triggered that outcome if there is a case to dispute the action.

What it signals for the industry

Tim Szuhaj, a legal research analyst covering the Americas for SIA, frames the audit as part of a broader turning point for the agency, moving from general rulemaking to industrywide compliance checks that apply real pressure.

For companies in the gig economy space, they need to prepare for audits to ensure both the entity and its workers are protected. An audit is not the same as guidance a company can interpret at its own pace. Audits need to be taken seriously, as findings can bring consequences that will cost you time, money, and, again, the company’s reputation.

What businesses should watch

Companies operating gig platforms in California, or those considering the model, should treat this audit seriously and should not consider it a single event. Regulators are watching how algorithmic decisions affect workers and whether workers can access the data behind those decisions.

If your business relies on similar data practices, even outside the gig economy, review your systems’ transparency before regulators step in and force you to.

7 KEY BENEFITS OF AN EOR

In light of discussing the expensive risk of misclassification and rising audits, we wrote an article on the benefits of having an Employer of Record (EOR) you can trust.

In short, the key benefits of using an employer of record are the ability to hire employees in any state or country without setting up a legal entity, transferring employment compliance risk, faster onboarding, predictable employment costs, and access to better benefits than most companies could administer on their own.

This guide walks through each benefit, when the model makes the most sense, and what to look for in a provider.

Read More Here