By Steven L. Brenneman, Fox, Swibel, Levin & Carroll, LLP
Does your organization use independent contractors or other workers labeled “owners” or “partners” who aren’t considered employees? If so, a recent decision by a federal court judge in Chicago that shows the danger in misclassifying employees may give you indigestion.
 |
What happened
Ruth Arunin, Kitisak Karnkingprai, and Chatchai Khamphaeng worked as food delivery drivers for Butterfly Sushi and Butterfly Thai Restaurants (we’ll refer to the restaurants collectively as “Butterfly”). Butterfly required drivers to have a valid driver’s license, a car, and the ability to drive and navigate Chicago streets. The workers paid for maintenance, repairs, and insurance on their vehicles.
The drivers signed independent contractor agreements with Butterfly and were paid in cash on a daily basis. Their compensation included a guaranteed payment for each shift, credit tips, cash tips, and delivery charges. The guaranteed payment per shift, referred to as “gas money,” was $20 per lunch shift and $25 per dinner shift.
Butterfly set the amount of delivery charges paid to the drivers, which were nonnegotiable. While the drivers kept their cash tips and didn’t need to report them to Butterfly, the restaurants deducted 10.5 percent to 11.75 percent from their credit card tips to pay Butterfly’s Illinois sales tax obligations.