A look into recent misclassification cases and the risks of worker misclassification for your business

Worker misclassification

“How bad can it be if we accidentally misclassify a few workers?”
You may find yourself asking this question as you prepare to expand in an African country. Surely, worker classification is not so great a priority, especially when you have so much else to take care of during your business expansion to a new continent.

At worst, your company could get fined and pay some damages…right?

You will be surprised to find that this is not remotely the case. Global legal precedents have proved that misclassification can come at a steep cost for businesses – a cost which is usually not limited to monetary terms either.

Find out just how misclassification has impacted businesses around the world – and how you can protect your business from these risks:

What is worker misclassification: independent contractors v/s employee

Worker misclassification happens when someone who is actually taking on the responsibilities of an employee is classified as an independent contractor. As such, the person is deprived of rights and privileges usually given to employees, such as: overtime payment, pension payment, employer contributions made to the government and local tax authorities. 

Wondering if there’s a way to further distinguish independent contractors from employees? Find out more here.

Global shipping company: $500 million settlement (1999-2014)

Plaintiffs in a 1999 case sued a global shipping company, arguing that drivers, acting as independent contractors, were unjustly charged for costs (uniforms, gas, insurance, car upkeep, and other needs of operation).

In December 2005, the complainants were granted $5.3 million in damages and an extra $12.3 million in legal fees due to the shipping company’s authority over them and their poor working environments. Drivers who were based in California received a further $9 million in damages three years after the court’s ruling.

By the end of 2016, the global shipping company had paid nearly $500 million in misclassification settlement payments.

How the employee misclassification situation could have been avoided

What is truly regrettable for the company is that with the right advice, it would have cost them much less than half a billion dollars to properly classify their workers.

Instead, the company went through nearly two decades of lawsuits, which dragged their reputation through the mud, and cost them a truly shocking sum of money.

At Africa HR Solutions, we would have advised the shipping company on the nature of employment from the very beginning, that is from the writing and signing of contracts. Guided by local legislation and experience, we would have pointed out that independent contractors cannot legally bear costs associated with operations, among other things.

 

Renowned global ride-hailing services company (2016)

A global ride-hailing services company was sued by a US citizen who worker as a driver under the company’s name for employee misclassification.

In the state of California alone, there are over 150,000 drivers operating for this company. Many of them drive over 40 hours each week and have come to view this company as their main or only source of income. The driver sued the company, their subsidiary, and 10 additional representatives in July 2016. He asserted that those responsible had broken the federal Fair Labor Standards Act, common law, and other North Carolina statutes. Except for the Fair Labor Standards Act claim, the court dismissed all other claims in preliminary hearings.

For “all natural persons who have worked or who continue to work as an Uber Driver anywhere in the United States and who have opted out of arbitration,” the court awarded class certification in July 2017.

Software and hardware giant (2000)

Permatemps are long-term contract workers who may not receive the same benefits as permanent staffers even after working for an organization for many years. Technology industry associations and legal experts were closely following the employee misclassification case that a software and hardware giant was involved in. This is because it could have compelled other similar businesses to provide benefits to a portion of their contract and temporary employees, which was a significant issue in the field of information technology.

The $97 million that the company was required to pay as part of the agreement would pay for legal bills, other costs associated with the lawsuit, and remuneration for the contract staff.

After the lawsuit, the company modified its temporary employment practices. Short-term employment is now limited to 12 months, after which employees must take a 100-day break.

What misclassification entails for the employer.

If, as an employer, you are found guilty of employee misclassification, you may have to break the bank and pay for the following:

  1. Wage Claims
  2. Sanctions & Fines
  3. Overdue Taxes
  4. Coverage for Employee Benefits

Industries where worker misclassification is most common.

  • “On-demand” startups
  • Cleaning and janitorial services
  • Home care
  • Cable and internet services
  • Hospitality
  • Hotels/lodging
  • Home products installation
  • Retail and Internet sales
  • Media
  • Trucking and transportation
  • Courier, delivery, and logistics
  • Construction
  • Manufacturing
  • Staffing services

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GRANT GERAGHTY - Africa HR Team

GRANT GERAGHTY

HEAD OF CLIENT RELATIONSHIP

Grant Geraghty is the longest-serving member of the Africa HR team. This resident subject matter expert and client champion is responsible for gaining a deep understanding of our clients’ unique HR needs in Africa and providing tailored solutions that align with their business objectives. Grant collaborates closely with our clients to ensure that their requirements are properly implemented, providing ongoing support and guidance throughout the process.

Grant brings a wealth of experience to his role, having served as Africa HR’s longest-serving employee. He holds a Bachelor of Commerce degree, with a major in Economics and Business Finance, from the University of Natal in South Africa. Additionally, he has completed a certification program in Payroll and Tax Administration from the University of Cape Town, further enhancing his expertise in HR operations and compliance.

His commitment to delivering exceptional service and his extensive knowledge of HR in Africa make him an invaluable member of the Africa HR team.

KEVINA TAKOORDYAL Africa HR Team

KEVINA TAKOORDYAL

HEAD OF OPERATIONS

Kevina Takoordyal has a BA Hons Business Management from the University of Glamorgan, UK, with MBA in leadership and Innovation, MBA General, PMP Certified, and Agile Scrum Master. She currently works as the Head of Operations at Africa HR Solutions Ltd with more than 20 years of proven leadership capabilities in Operations, Business Development, People Management, Process Optimization, and Project Management in the Financial Services, BPO, Banking Industry, and Heath Care Industry. In Senior leadership roles with an international footprint across Europe working and extensive Pan- African experience from a compliance, finance, and operations angle, Kevina comes across with a panoply of cross-functional skills. Kevina also serves on a few Boards, Non-Independent Executive at MioD and for NGOs on a voluntary basis, a coach and mentor to aspiring female leaders across Africa and Mauritius.

Kevina is a firm believer in Servant Leadership with a strong focus and commitment to uplifting others, with the ability to deliver through a highly engaged – diverse team, and works towards consistently synergistic value creation. While being a focused and adaptive thinker and Kevina is actively participating in panel discussions on Innovation, CX, Digital transformation.

Kevina serves as Project Assessor for the National Youth upskilling program. She has been recognized as Global Talent in a few companies, Ceridian, and International SOS Ltd whereby she has been awarded a few scholarships and had the opportunity to be mentored by Senior Vice President in the US. Award Winner in various fields and at a national level and recognized including Super Achiever Leader Award in Africa in 2016, Awarded Africa Women Leader 2018.

VILOSHNA PACKIRY POULLE​

VILOSHNA PACKIRY POULLE

Head of Finance & Business Support

Viloshna is an experienced finance professional with 18 years of expertise in strategic financial planning, financial analysis, cash flow management, systems and controls implementation, financial reporting, and continuous process improvements. She currently serves as Head of Finance & Business Support, where she has successfully automated and leveraged the financial reporting system capabilities to ensure efficient company operations.

Viloshna’s background includes senior roles in a multinational pharmaceutical company and a large listed Mauritian conglomerate. Her meticulous attention to detail and strategic thinking have streamlined financial processes, making her a valuable addition to any finance team. Viloshna is a qualified finance professional with an FCCA qualification and an MBA, bringing valuable expertise to any organization.

In her current role, Viloshna leads the company’s Treasury and Payments function, including the fulfillment of the company’s cross-border payments into Africa. With her strong educational background and extensive experience, Viloshna consistently demonstrates her ability to optimize financial operations, minimize risks, and improve profitability. Her expertise in financial reporting and process improvements make her a valuable asset to any organization.

MARK DU PREEZ​

MARK DU PREEZ

Head of Legal & Compliance

A qualified lawyer who joined Africa HR Solutions in July 2020, Mark Du Preez has experience working in private practice for a reputable law firm in South Africa. He also played commercially focused roles at a leading private bank, wealth management company, and outsourcing firm in South Africa and Mauritius.

Mark has played a pivotal role in Africa HR Solution’s risk mitigation strategy, which positively impacted P&L performance over the years.

He currently leads the Partnerships function of the company including relationships and oversight with in-country partners (ICPs) across Africa.

Alex Daruty - Africa HR Team

ALEX DARUTY

Head of Commercial

Alex has more than 15 years of experience in the global, strategic development of both enterprise and consumer brands in categories including technology, transport, enterprise software, entertainment, and travel.

With experience in roles on both agency and corporate side, he has worked across international brands and has led the development and execution of multi-discipline campaigns across EMEA, NORAM and Asia Pacific.

His focus is on driving meaningful business impact through brand differentiation and building high-functioning, digitally oriented, and analytically driven capabilities. He is motivated by working with, and developing dynamic people, teams, and organizations.

He leads, manages, develops and mentors the Key Account Management department, including line management responsibility for the team of Key Account Managers and Key Account Administrator who represent the Company as the primary communication link between all relevant stakeholders, including clients, third party in-country partners and internal functions.

Originally from Mauritius, he holds bachelor’s degrees in International Business, Finance and Management from the University of Nevada, Reno.