‘Crowdsourcing’ employer denies minimum-wage violations

CrowdFlower Inc., which provides its clients with an Internet-based labor force, has responded to a California federal court lawsuit by claiming it does not have to pay its workers minimum wage because they are contractors, not employees.

Therefore, the company says, the federal Fair Labor Standards Act, 29 U.S.C. § 201, does not apply to its nationwide network of thousands of workers, who work off-site on their own computers.

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Even if the workers were classified as employees, they were properly compensated for their work, according to CrowdFlower’s answer, filed in the U.S. District Court for the Northern District of California.

(Click here for the answer on Westlaw.)

Attorney Michael Ludwig, a partner with Blank Rome LLP who is not involved in the suit, said that while the FLSA was enacted before “crowdsourcing” changed the employment landscape, it still is the law.

”Just because a person now has the ability to work from home on his or her own computer when he or she chooses and for as long as he or she pleases does not necessarily mean that he or she is not an ‘employee’ … not covered by the minimum wage laws,” Ludwig said in an email.

According to Crowdsourcing.org, a professional association of such Internet-based employers, the company model is “a distributed virtual labor pool, available on-demand to fulfill a range of tasks from simple to complex.”

Oregon resident and former CrowdFlower worker Christopher Otey sued the San Francisco-based company and its officers, alleging violations of the FLSA and Oregon labor laws.

The suit is a combined FLSA collective action and a class action on behalf of CrowdFlower workers.

According to the suit, CrowdFlower handles projects, such as confirming the addresses and phone numbers on sales and marketing lists for large company clients, and uses more than 200,000 online workers nationwide.

(Click here for the amended complaint on Westlaw.)

The company does not pay workers minimum wage and in some cases reimburses them with online game credits instead of cash, the suit says.

The credits-for-work system involves putting clients’ tasks into online games, with players/workers earning virtual currency, according to a 2009 blog post by CrowdFlower CEO Lukas Biewald.

The complaint says Biewald has admitted to this unusual arrangement.

“I love it because we almost trick the game players into doing something useful for the world while playing these games.  Just to do 10 minutes of real work that a real company can use and we’ll give you a virtual tractor,” Biewald told BBC News last year, according to the complaint.

In one interview, Biewald allegedly said workers are paid $2 to $3 per hour, well below the national minimum wage of $7.25.

Otey seeks compensatory damages on behalf of current and former CrowdFlower workers nationwide under the FLSA and for current and former workers in Oregon under the state’s wage laws, Or. Rev. Stat. §§ 653.055, 652.150 and 562.200.

CrowdFlower denies the allegations.  In its answer, the company maintains that its workers are contractors and so the FLSA and Oregon law do not apply.

Otey cannot represent other workers in the proposed actions, the answer says, because he was paid for the work he performed at a rate equal to or greater than hourly minimum wage.

According to CrowdFlower, Biewald’s statements regarding compensation were inaccurate or taken out of context.

In addition, the answer says, some work that people were allegedly not paid for was done voluntarily, without the company’s knowledge or off the clock.

According to attorney Ludwig, companies that created the virtual workforce must ensure that employees are properly compensated and “could be liable for violations of wage-and-hour laws and be subjected to significant damages and penalties” until the various issues are settled.

When asked about how this suit could affect crowdsourcing, Ludwig said he saw it as a step toward resolving the issues: “Hopefully having some certainty as far as how crowdsourcing workers must be paid will allow the industry to continue to evolve to the benefit of businesses and workers alike.”

Otey v. CrowdFlower Inc., et al., No. 12-5524, answer filed (N.D. Cal., S.F. Div. Jan. 10, 2013).