I see the bad moon a-rising
I see trouble on the way
I see earthquakes and lightning
I see bad times today

When John Fogerty wrote “Bad Moon Rising,” he was reportedly inspired by the 1941 film The Devil and Daniel Webster. There’s a scene in the film where a hurricane destroys the crops of several farms, but spares those of a man who had made a deal with the devil in exchange for wealth. 

When classifying independent contractors, a deal with the devil generally doesn’t work. If you misclassify your workers as contractors, when the law says they should be employees, trouble will eventually be on the way.

A printed media delivery company found that out the hard way, after being investigated by the New Jersey Department of Labor and Workforce Development (DLWD).

There was no civil lawsuit here. A state agency went after the company. Be wary of state agency audits. This one cost the company $2.7 million in a recent settlement.

• Overview: The New Jersey Attorney General and the DLWD reached a $2.7 million settlement with Publishers Circulation Fulfillment, Inc. (PCF) for misclassifying delivery workers as independent contractors.
• Findings: The investigation revealed that PCF exerted significant control over its delivery workers, who were largely immigrants working overnight for low wages. PCF failed to classify these workers as employees, violating New Jersey labor laws.
• Settlement Details: The settlement totals $2.7 million, covering approximately 2,400 workers.
• History of the Investigation: The investigation began in 2021, focusing on PCF’s compliance with state employment laws from 2019 to 2022. It was found that PCF made unlawful deductions from workers’ pay and failed to provide essential protections. In a separate 2022 settlement, PCF was required to pay nearly $2.7 million for failing to contribute to the state’s Unemployment Compensation and Disability Benefits Funds between 2015 and 2018.

When considering independent contractor relationships, companies often make the mistake of assuming that if both parties are satisfied with the arrangement, it will be ok. Not so.

State agencies are becoming more and more aggressive in enforcing misclassification on their own. States lose money from misclassification because employers contribute funds to state unemployment and workers’ compensation funds for employees, but not for contractors.

So make sure your workers are properly classified, and heed this warning from John Fogerty and the band:

Hope you got your things together
Hope you are quite prepared to die
Looks like we’re in for nasty weather
One eye is taken for an eye.

© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.