Attorney General Ellison wins restitution for workers that gig-work company misclassified

Arise Virtual Solutions to pay $300K to customer service workers it misclassified as independent contractors, stop doing business in Minnesota

December 19, 2024 (SAINT PAUL) — Minnesota Attorney General Keith Ellison announced today that his office has obtained a settlement with Arise Virtual Solutions, Inc. (“Arise”) to resolve allegations that Arise misclassified its workers as independent contractors instead of as employees and violated Minnesota laws that ensure minimum wage, overtime, and rest breaks. As part of the settlement, Arise agrees to pay $300,000 in restitution to workers and to stop doing business in Minnesota.

Arise is a Florida-based gig work company that connects work-at-home customer service agents to large corporations that are seeking to outsource call center services. In the last four years, approximately 300 customer service agents located in Minnesota worked on the Arise platform. Each of these workers completed lengthy unpaid training courses before Arise allowed them to work as customer service agents from their homes. Because Arise treated these workers as independent contractors, Arise agents were not entitled to minimum wage, overtime, meal and rest breaks, workers compensation, unemployment insurance, and other important employment protections.

“Employer misclassification fraud hurts workers who were misclassified and their families, but it also hurts businesses who play by the rules and are undercut by competition willing to break the law,” Attorney General Ellison said. “Misclassification also harms Minnesota taxpayers, because employers who misclassify do not pay what they owe and the rest of us are forced to make up the difference. This settlement against Arise is another welcome victory in my ongoing fight to ensure Minnesotans are not being shortchanged by employers who misclassify and put profits over people.”

Any Minnesota-based worker who trained or performed work on the Arise platform since May 19, 2020 is eligible to receive a portion of the $300,000 settlement fund. A claims administrator will contact eligible workers via mail, email, and/or phone about receiving restitution payments.

What is employer misclassification fraud?

Employer misclassification fraud happens when an employer incorrectly classifies an employee as an independent contractor, resulting in that employee losing access to important rights, benefits, and protections available only to employees. The Office of the Legislative Auditor (OLA) released a report earlier this year finding that misclassification fraud was a growing problem in Minnesota. Of the workplaces audited, the OLA found that 22% of employers misclassified at least one employee.

An independent contractor is a person who runs their own business. They typically do specialized work for multiple clients and work outside of the scope of their clients’ normal business. Independent contractors generally set prices for their services and determine when, where, and how to perform their work. They may hire their own employees and delegate their work to others. The independent contractor is typically compensated for completing a certain job and cannot have their contract terminated as long as they complete the end result of the contract.

Employees, in contrast, do not run their own businesses and usually work for a single employer, or a few employers. Employers have the right to direct the way an employee performs work. Employees can generally quit at any time without penalty and employers can fire them with little notice. Employees can’t make a profit or loss based on business decisions. An employee generally does not offer the services they perform for their employer to the general public. An employee is typically paid by the hour, week, month or on a piece rate, instead of being paid by the job.

Combatting misclassification in Minnesota

In July 2023, the Attorney General formed an Advisory Task Force on Worker Misclassification to study the issue of worker misclassification and its impacts, explore best practices in policy and enforcement, and propose a set of recommendations for both enforcement and regulatory reform.

In early 2024, the task force adopted a policy proposal that helped form the basis for a landmark bill to combat employer misclassification fraud which passed in the 2024 legislative session. Among other things, the bill created the Intergovernmental Misclassification and Enforcement Partnership, in which the Attorney General works alongside other state enforcers to maximize efforts to detect, investigate, and deter employee misclassification. The bill also created a private right of action for victims of employer misclassification fraud and increased penalties to provide meaningful deterrence.

Filing a complaint as a worker

Workers with concerns or complaints about misclassification or other systematic violations of state and federal wage laws can contact the Attorney General’s Office through its online complaint form (available in Spanish or English). The Office can also be contacted by calling (651) 296-3353 (Metro area) or (800) 657-3787 (Greater Minnesota).