Archive for the ‘Independent contractor’ Tag

CrowdFlower Under Fire: Lawsuit Threatens Employment Status

Friday, December 14th, 2012 by Seth Weinstein

crowdflowerIt is not a good day to be CrowdFlower. The website, based on crowdsourcing, offers a service akin to Amazon Mechanical Turk: huge amounts of data handled cheaply and quickly by large crowds that are paid per task. But a new lawsuit leveled by an Oregon man who works for the company claims that its employees are drastically underpaid. According to the suit, CrowdFlower pays its workers much less than the federally-mandated minimum wage for employees, with some fees going as low as $2 to 3 an hour.

The sticking point in the suit is the classification of CrowdFlower’s work force. The suit claims that they are employees, like at any other company, and must therefore not only be paid the minimum wage, but also must have income and other taxes withheld. CrowdFlower, however, claims that their employees are independent contractors, and subject to less strict guidelines. The results of the suit will most likely hinge on the classification of their employees into one category or the other.

It’s tricky, though. According to the official IRS website, there is no one deciding factor that determines if an employee is or is not a contractor:

Businesses must weigh [behavioral, financial, and relationship-related] factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

In a nutshell, this means that the plaintiff’s side of this case will likely launch a large-scale investigation into CrowdFlower’s employment methods and worker duties, as well as peer into how the workers are paid, and by whom. If I can be honest, it does not look great for CrowdFlower. The lawsuit claims that some of their employees aren’t even compensated monetarily, and are instead given online gaming credits or points towards award programs. If it turns out that CrowdFlower’s workers cannot be classified as contractors, that is going to be all but a fatal blow. Further complicating the matter is the fact that CrowdFlower does not directly employ its workers, but instead hires them through channels like MTurk.

Further reading on the IRS site details what will happen if the employees are found to not be contractors. In the most likely scenario, CrowdFlower will have to pay both back taxes to the IRS and full retroactive compensation to the plaintiff, plus damages. Since the plaintiff is also attempting to get his suit into class action status, he may not be the only one who gets paid. However, CrowdFlower can claim that it had a “reasonable basis” for treating its workers as contractors, in which case they may not have to pay the aforementioned compensation.

There is also the possibility that CrowdFlower will be forced to reclassify its employees and give them all the tax- and compensation-related baggage that goes with it. Again, this could be a huge blow to the company since they’ve built their model on the idea that their workers are contractors. Without drastically increasing prices or dramatically cutting costs, they are simply not going to have the money to keep their namesake Crowd around.

It’s times like these that I am very thankful for how Ziptask runs things. We hire contractors as well, but with two major differences when compared to the CrowdFlower model: we are unequivocal about labeling our workers as contractors, and we pay them a fair wage. Crazy, right? But it turns out people like feeling like their time is worth something. There’s a reason that there isn’t a huge line at McDonald’s to be the next fry cook. Some work is menial and less-than-desirable, but it still has to get done. And if CrowdFlower wants that to happen, it’s in their best interest to not get sued for treating their employees poorly.

Simple stuff, really.

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