California DAs Sue Gig Company for Misclassifying Workers

Two district attorneys say the app-based gig company Handy is violating state law by not providing minimum wage, sick pay and other employment benefits.

SFDA spokeswoman Rachel Marshall, Assistant DA Scott Stillman and San Francisco District Attorney Chesa Boudin discuss a new lawsuit filed against the gig company Handy in a Facebook Live video on March 17, 2021.

SAN FRANCISCO (CN) — Two California district attorneys are teaming up to sue a home cleaning and repair gig company for allegedly misclassifying tens of thousands of workers as independent contractors.

The district attorneys of San Francisco and Los Angeles on Wednesday sued the New York-based company Handy, which operates an online application that allows customers to schedule home-cleaning and repair services.

“Handy classifies its workers that perform the central core function of its business as independent contractors when, actually, under the law they are Handy’s employees,” San Francisco District Attorney Chesa Boudin said in a Facebook live video announcing the lawsuit Wednesday.

Handy, a company started by Harvard Business School classmates Oisin Hanrahan and Umang Dua in 2012, has scheduled home-cleaning and repair gigs for tens of thousands of workers in California, according to the San Francisco DA’s office.

The lawsuit filed in San Francisco Superior Court accuses Handy of failing to pay minimum wage and overtime wages or reimburse job-related expenses such as cleaning supplies. It also claims the company denied workers sick leave and did not pay unemployment insurance or payroll taxes.

It further accuses the company of illegally imposing fines on workers and deducting pay from their wages. Additionally, it claims the company did not cover quarterly healthcare expenditures for workers in San Francisco as required by a city ordinance.  

In an emailed statement, a Handy spokesperson said the lawsuit “has no merit” and is based on a “fundamental misunderstanding” of California law and the rights of Handy and its workers, which it calls “pros.”

“Handy complies with all laws and regulations in California and elsewhere, and we will vigorously defend ourselves in court,” the spokesperson said.

Assistant San Francisco DA Scott Stillman, who runs the office’s Economic Crimes Unit, said Handy cannot satisfy the three requirements necessary to classify workers as independent contractors under state law.

The California Supreme Court established a three-pronged standard, known as the “ABC test,” for determining a worker’s employment status in its 2018 ruling in Dynamex v. Superior Court. That standard was later written into state law with the passage of Assembly Bill 5 in 2019.

To classify workers as contractors under the law, a company must show it does not directly control the worker, the work falls outside its usual course of business, and the worker is “customarily engaged in an independently established trade.”

Stillman said Handy directly controls workers by monitoring them through an app for several hours before and after their scheduled shifts. The company allegedly fines workers if they show up to assignments late or leave early. Stillman argued that Handy’s gig workers also support the company’s core business function — providing home-cleaning and repair services.

The assistant DA noted that female workers who often enter homes alone to perform services for Handy lack the same legal protections against sexual harassment and discrimination that regular employees enjoy.

“Handy is putting them in the home and putting them at risk of harm and not providing the worker protections they are entitled to,” Stillman said.

Handy also requires its workers to sign arbitration agreements waiving their right to sue the company in court. Labor disputes, including ones involving employment status, must be resolved through a private arbitration process instead.

“That means government agencies who are not bound by such agreements have a role to play when it comes to making sure workers are not misclassified,” Stillman said.

Boudin argued that misclassification not only harms workers. It also harms businesses that “play by the rules” and have to compete against companies that gain an unfair advantage by not providing employment benefits.

He said it also harms the public because companies evade payroll taxes and don’t contribute to the state’s unemployment insurance fund, which he said is essential for sustaining workers when a catastrophe such as a global pandemic strikes and forces millions of people out of work.

“Companies that are cutting corners are reaping an unfair advantage and windfall on the backs of vulnerable women of color — in the case of most of Handy’s domestic workers — and really on the backs of all of the companies that play by the rules and by taxpayers who suffer and have to foot the bill when things go wrong,” Boudin said.

In a statement Wednesday, Gascon said employers should not be allowed to “cheat” workers out of essential benefits, such as health insurance and workplace safety protections.

“By failing to provide healthcare, particularly during a pandemic, these companies not only have an advantage over companies that follow the law, but also are passing their health care costs on to all of us as taxpayers,” Gascon said.

The district attorneys seek a court order requiring Handy to classify workers as employees, pay civil penalties and provide restitution to workers for unpaid wages and job expense reimbursement.

Last year, voters approved a ballot measure backed by Uber and Lyft that exempted app-based transportation and delivery workers from California’s labor law, allowing those companies to continue classifying their workers as independent contractors.

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