More than 3,000 temporary workers serving food or cleaning hotel rooms are employees, not gig workers, and should be treated as such, the Denver Auditor said in a decision that seeks more than $1 million in penalties against two staffing agencies.
Instawork and Gigpro, which specialize in hourly workers for the restaurant and hospitality industries, call the workers “independent contractors,” but the jobs that the companies fill run counter to that term and fall under what the state law defines as employees.
The companies also were accused of numerous unpaid wage and overtime violations, and failing to provide sick leave.
“You can’t be a dishwasher in a restaurant and be an independent contractor,” Denver Auditor Timothy O’Brien said. “That defies logic.”
Both companies provide mobile apps for the temp workers to apply for openings. The business clients pay Gigpro or Instawork directly, not the worker. And both companies take an extra fee as payment. Neither company withholds taxes or pays for unemployment insurance for the worker — that’s left to the individual worker.
But like permanent employees, temps go through a vetting process, confirm shifts a day in advance, meet requirements like dress codes, go through something akin to performance reviews and can be terminated based on the company’s discretion. An independent contractor, on the other hand, has a contractual agreement that “prevents consequence-free termination because ending such an agreement early and without cause gives rise to damages.”
“Instawork does not operate as a passive online marketplace where clients merely post shifts and receive responses from — potentially — the entire body of users. Instead, the employer takes direct action to ensure compatibility for its business clients by ‘automatically’ and ‘intelligently’ (matching) businesses with our vetted pool … of workers,’” the auditor’s order said.
San Francisco-based Instawork received the brunt of the fines — more than $820,000, most of which came from 13,195 violations of failing to provide sick leave. They also must pay another $275,516 in restitution to nearly 3,000 workers. Gigpro faces about $50,000 in fines and restitution to about 90 workers. The companies were ordered to cease and desist from misclassifying workers and have 30 days to comply.
In an email, Kira Caban, Instawork’s head of strategic communications, said, “Instawork is coordinating with the City of Denver to address an incomplete and non-final administrative determination issued by Denver Labor. While the company does not comment on active investigations, Instawork prioritizes compliance with applicable regulations and is committed to ensuring every person who uses our platform to find local work receives full and proper worker protections including payment at hourly rates that meet or exceed the minimum wage.”
In Colorado, staffing agencies are employers that supply the temporary placements to a second employer and that is how a company like Instawork operates, O’Brien said. Clients pay Instawork for the employment service and if they want to hire the temp worker permanently, they must pay a “direct hire fee” to Instawork. The auditor’s office did not share which hotels or restaurants had worked with the staffing agencies because it’s considered confidential.
A new wage-theft ordinance was passed last year in Denver giving the auditor’s office the ability to proactively conduct investigations. “We don’t have to have a complaint to go forward,” O’Brien said. “We know that in the hospitality industry, workers are subject to abuse, for lack of a better term, from employers.”
His office has aggressively gone after wage theft, which can happen after the minimum wage increases and Denver employers don’t raise wages accordingly. Last year, the auditor’s office said it recovered more than $2 million owed to workers.