A California politician called for an investigation of Deel Inc., a San Francisco-based global employer-of-record provider with a $12 billion valuation, saying the company is misclassifying its own workforce as independent contractors and advising clients on misclassification. Deel denies the allegations and said they were not contacted prior to the announcement.
California state Sen. Stephen Padilla, D-San Diego, announced July 6 that he wrote a letter to the California Labor and Workforce Development Agency calling for an investigation.
Deel “reportedly onboarded much of its thousands-strong workforce as independent contractors as part of its global expansion strategy — including declaring its own CEO, Alex Bouaziz, as an independent contractor, according to a Business Insider article,” the letter said. “In fact, several employees have reported being shocked to learn they had been hired as long-term contractors despite originally applying as full-time employees, and without the ability to choose.”
The independent contractors were required to work full time during regular working hours, used company equipment, were assigned tasks under the supervision of upper management and received performance reviews, according to the letter. “Overall, workers report no noticeable differences between in-house employees and independent contractors since their day-to-day responsibilities are virtually indistinguishable.”
Deel also appears to be advising its clients on how to misclassify workers and avoid taxes, according to the letter.
Deel said that is not the case.
“These allegations are completely made up and regurgitated from old news, most likely based on competitor hearsay,” the company said in a statement to SIA. “Compliance is literally what we do in over 120 countries. We have to understand it for our customers, and we certainly practice it ourselves. Today we have over 50 compliance experts in-house and an external network of country advisors. To advise clients on how to misclassify their workers would be at complete odds with our business model. We’ve also created a consortium with external academics called the Deel Lab for Global Employment to study and help prevent misclassification practices.”
The company said it does engage a handful of contractors for services in California, but the number of contractors across its US operations represents less than 1% of its workforce. Claims of misclassification there are “ridiculous,” it said.
“Unfortunately, Sen. Padilla did not reach out to us for comment or facts prior to publishing his letter,” the company said. “We welcome speaking with him directly to provide factual information.”
Separate agencies can take different approaches to IC classification and apply various litmus tests to establish status, but control is often a mitigating factor. For example, last month the US National Labor Relations Board voted to overturn a more business-friendly ruling made during Donald Trump’s presidency that elevated workers’ “entrepreneurial opportunity” over other factors when classifying them as employees or contractors. Both the Trump- and Obama-era classification tests use the same 10 factors drawn from common law, which include the amount of control a company has over the work, the skill required for the job and how the worker is paid, Bloomberg Law reported. However, they differed in their treatment of entrepreneurial opportunity.