Two workforce staffing companies are suing the City of Denver and the Denver Auditor’s Office claiming that the city is going beyond its authority to investigate wage theft.
The lawsuit, filed last week by Instawork and its parent company Garuda Labs, Inc. along with Advantage Workforce Services LLC, claims that the city does not have jurisdiction to investigate and enforce wage theft violations beyond minimum wage.
The suit dates back to a January decision from the Auditor’s Office ordering Instawork to pay more than $1 million in restitution and fines after finding overtime and paid sick leave violations.
In its decision earlier this year, the Auditor’s Office found that Instawork misclassified thousands of workers as independent contractors.
Instawork is a gig staffing company and platform, where users have flexibility around choosing shifts for things like serving food or cleaning hotel rooms.
But the Auditor’s Office says that Instawork is not any different from other staffing companies, which must consider workers as employees and pay them for sick leave and overtime.
“Independent contractor misclassification impacts our whole community,” the Auditor’s Office wrote in a January statement about the investigation. “Not only can it harm individuals of any income level, it allows some employers to avoid paying taxes to support programs like unemployment insurance, Social Security, and Medicare. And it unfairly harms high-road employers who do pay their employees and their taxes, but who cannot compete against those who cut corners.”
It’s a debate that has played out with tech companies like Uber and Lyft, which have classified drivers as independent contractors to avoid paying overtime pay and other benefits.
A new rule from the federal Labor Department announced this year expands protections for these workers but is expected to be challenged in court.
Instawork disputes Denver’s findings in the lawsuit.
The suit also disputes a potential fine that could reach hundreds of thousands of dollars if Advantage Workforce Services does not provide the Auditor’s Office with what the company calls “sensitive and confidential business and personnel records.”
The lawsuit claims that the Auditor’s Office conflicts with the city charter and state law, “making all of Denver Labor’s orders invalid.” The suit also goes after Denver’s ability to enforce labor violations beyond simply minimum wage.
But Denver is a home rule county, where local governments can legislate in addition to state laws.
The companies involved want the courts to give the company relief from the imposed fines.
“Instawork is committed to ensuring each person who finds work through our platform enjoys the flexibility of a modern labor marketplace and the protections and benefits they expect, including payment at hourly rates that meet or exceed minimum wage, opportunity to earn overtime, and the ability to request paid sick leave,” wrote Kira Caban, head of strategic communications for Instawork.
“Despite Instawork’s good-faith cooperation, on January 16, 2024, Denver Labor issued a non-final administrative determination in which it reached conclusions and sought penalties Instawork believes are unsupported by either fact or law and which fall outside Denver Labor’s authority or mandate,” Caban continues.
The Auditor’s Office stands by its January decision.
“Instawork misclassified thousands of employees in Denver and violated their basic rights more than 16,000 times,” said Auditor’s Office spokesperson Tayler Overschmidt. “It is desperate to avoid accountability.”
The Denver City Attorney’s Office declined to comment on behalf of the city, citing pending litigation.
The lawsuit comes as Denver seeks to be a leader in going after wage theft.
City Council raised Denver’s minimum wage in 2019, and since then has passed a number of laws strengthening the power of the Auditor’s Office to go after wage theft.
The office recovered record-breaking dollars for workers in 2023.
