San Francisco’s $2.1 Million Settlement with Qwick Puts Spotlight on Worker Misclassification

Worker misclassification is a persistent issue in the hospitality industry and the broader gig economy. Misclassification occurs when employers classify workers as independent contractors rather than employees, often to get around labor laws and reduce costs. The practice affects workers’ rights and job security, as well as access to benefits and labor law protections.

Misclassification is particularly common in the hospitality sector, where businesses often rely on flexible staffing arrangements to meet fluctuating demand. Companies may hire workers on a temporary or per-project basis. They may classify them as independent contractors to avoid providing benefits such as health insurance, paid time off, and unemployment insurance. This allows employers to save on payroll taxes and other expenses associated with traditional employment relationships.

However, many of these workers are under the direct control of their employers and perform duties that are integral to the business’s operations. In hotels and restaurants, misclassified workers may include housekeepers, servers, bartenders, and kitchen staff who work regular shifts and are subject to the same rules and supervision as employees. Under California law, companies can only classify workers as independent contractors if they meet specific criteria.

The City of San Francisco sued Qwick, a hospitality staffing startup, for worker misclassification and wage theft in September 2023. San Francisco City Attorney David Chiu reached a $2.1 million settlement with the company for misclassifying workers as independent contractors instead of employees. He hoped the settlement would send “a clear message” that there was no room for “this illegal business model” in the hospitality industry.

Qwick provides restaurants, hotels, bars and caterers with on-demand staffing via a mobile app. While Qwick is based in Arizona, the company has been operating in the Bay Area and across California since 2019.

When a Qwick worker accepts a shift, they work alongside hospitality employees who perform the same job duties in the same manner. However, the company classified workers like waiters, cooks, dishwashers, bartenders, event staff and others as independent contractors.

Despite classifying workers as independent contractors, Qwick allegedly controlled their hours and assessed their job performances on the app. According to the lawsuit, Qwick deprived workers of essential protections and benefits. These include earned wages, overtime pay, paid sick leave and healthcare benefits, all of which are mandated by California labor laws for employees.

As part of the settlement, Qwick agreed to pay restitution totaling $1.5 million to affected workers. Additionally, thousands of workers transitioning to employee status will receive up to $350,000 in accrued sick leave hours. The company was also ordered to pay $250,000 in civil penalties to the City of San Francisco. These measures aim to address past grievances and establish a fairer employment framework moving forward.

If the San Francisco Superior Court approves the proposed settlement, it would set a precedent for future enforcement actions against companies engaging in similar practices. It would also be the first state injunction to require a gig economy firm to reclassify thousands of independent contractors as employees.

Worker misclassification remains a pressing issue in San Francisco and around the Bay Area. Employers who misclassify workers gain a competitive advantage by avoiding compliance with labor laws and undercutting businesses that adhere to regulations. This can hurt wages and working conditions for all workers in the industry.

While the gig economy offers flexibility and convenience, one of its pitfalls is employers who try to take advantage of workers. Just because an employer says you are an independent contractor does not necessarily mean you are one.

When workers are classified as independent contractors, they are not covered by many labor laws, making it difficult for them to assert their rights and seek recourse for workplace violations. This can perpetuate a cycle of exploitation and insecurity for workers, particularly those in low-wage and precarious jobs. Workers often do not realize they may be entitled to overtime pay and various benefits. 

At McCormack Law Firm, we are committed to protecting the rights of workers. Although we were not involved in the Qwick lawsuit, we have experience handling all types of worker misclassification cases. If you suspect you have been misclassified, our San Francisco employment lawyers can help. Contact McCormack Law Firm for a free initial consultation.