One of the biggest compliance problems faced by Accounts Payable Departments are issues posed by companies misclassifying workers as independent contractors when regulators think these workers are employees; as recently found out by yet another multinational corporation and in regards to thousands of its workers.

Late in June a class action lawsuit was filed in Suffolk County Superior Court (with another filed in US District Court in California) against Uber Technologies. The lawsuits allege that Uber improperly classifies its drivers, who own their cars and use Uber’s smartphone app to get work, as independent contractors. This means no health care benefits, no 401(k) contributions, no vacation time, etc...And guess what Uber will have to pay out to each impacted individual plus penalties and interest if it loses this lawsuit? Yes, that's right; all of the above. And mind you, Uber claims to be creating 20,000 new driver jobs per month in 38 countries worldwide; including 77 cities in North America.

Both California and Massachusetts have some of the strictest tax & labor laws in the country. In fact, in Massachusetts, if your organization is doing business you should know that for workers to be properly classified as independent contractors they need to be engaged in activities that are “outside the usual course of business of the employer.” Otherwise they are employees, and if they are not paid and treated as such then your organization is on the hook for big penalties.

These penalties include those from federal and state level regulators as well from civil lawsuits. The civil lawsuits in and of themselves can generate multi-million dollar settlements as Starbucks recently found out in 2012 when it was forced to pay a $14 million settlement involving the wage theft of 11,000 baristas. Another such company is Fed Ex, which has ongoing lawsuits against it in Massachusetts, Montana, and Pennsylvania - all for misclassifying drivers as independent contractors.

My subscribers are of course aware of these issues. For years now I have been hammering on about the misclassifying of workers as one potentially devastating source of legal liability. But for some reason management at many large multi-state companies continue to ignore until too late the threat faced by worker misclassification lawsuits and associated state and federal level audits and proposed penalties. So what should you do?

At a minimum let your Accounts Payable supervisor know that you believe your organization should audit it's own operations and make sure such issues are not a potential problem. From there you can use these ongoing lawsuits as a reason to ask for an increase in your training budget. Whether you train your team using an in-house expert you may be lucky enough to have or if you hire a company such as my own; it is imperative that you act. Worker classification lawsuits are becoming more and more common with each passing year. Your organization should not put itself in a position to take what all too easily becomes a multi-million dollar hit for want of proactively addressing the problem while it can and for a fraction of the cost.