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$6M Lowe’s Settlement In Textbook Case of Systemic Employee Misclassification

Lowe's Home Center independent contractors

A federal judge in California has approved a settlement between Lowe’s Home Centers and a class of its home improvement contractors who claimed they were misclassified as independent contractors. The maximum settlement amount in Shepard v. Lowe’s HIW is $6,500,000, depending on the number of contractors who file claims.  Lowe’s will also pay $1,625,000 in legal fees.  

Pepper Hamilton LLP explains the case:

They alleged that Lowe’s Home Centers offered its customers the opportunity to hire contractors to install products purchased from Lowe’s. Such products included appliances, kitchens, bath and plumbing fixtures, flooring, doors and windows, garage doors, lighting, outdoor fixtures, and insulation. The complaint, which was originally filed in state court, alleged that Lowe’s had the right to control, and did in fact control, all aspects of installation jobs by, including requiring that the installers to identify themselves as “installers for Lowe’s” or by saying “I work for Lowe’s”; wear Lowe’s hats and shirts at work sites; use signs stating “Lowe’s Installation”; attend training by Lowe’s; and comply with Lowe’s production requirements.

The complaint also alleged that:

• Lowe’s Production Office managed each installation project;
• Lowe’s set the fees to be earned by each home improvement contractor;
• Lowe’s imposed a non-compete covenant on installers; and
• Lowe’s marketed the contractors’ services on its website on an “Installation” page that provided “Let Us Do The Installation For You” with our “trained installers,” who services were “guaranteed by Lowe’s warranty.”

The case reveals the blueprint for companies withholding benefits under the ‘independent contractor’ mantra. A veritable laundry list of perks associated with employee status are listed:

The installers further alleged that Lowe’s failed to provide the installation contractors with an array of benefits that were available to employees, including comprehensive group medical insurance, prescription drug coverage, vision care, group life insurance, paid sick leave, paid vacation, tuition reimbursement, employee discounts for purchases, short and long term disability coverage, a stock purchase plan, and a matching 401(k) savings plan. They also claimed they were entitled to reimbursement, as employees, for all necessary expenses incurred in performing their services.

In a commonly crafted ruse, Lowe’s denied all allegations and maintained that the installers were correctly labeled as independent contractors despite settling in private mediation.  Had the case gone to court, the maximum amount recoverable by the misclassified workers would have been nearly $33 million.  

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