A California-based company involved in real estate sales and online referrals has agreed to a settlement with a group of current and former employees that will cost the business approximately $1.7 million.
The lawsuit arose over questions about the appropriateness of classifying the business' workers as independent contractors or outside salespeople instead of non-exempt employees, according to local source Inman News. The settlement's value was roughly equal to 10 percent of the company's total fourth quarter revenue for 2013.
The reclassification led to a spate of class-action suits that progressed to include additional financial consequences for the organization, with one other case in particular costing $5 million.
Re-categorizing those previously compensated as employees into the independent contractor listing is often problematic for businesses unless they can prove the myriad qualifications for the designation are met. Components of that test include the type and amount of control exercised by the employer over the contractor, the contractor's contribution to vital business activities and the possibilities for both overall profit and loss on the part of the contractor.
Businesses should consider discussing employee classification with legal counsel, as well as making sure their attendance tracking software is effective and up to date to avoid these kinds of issues.
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