LA Hospitality Company Sues Rivals in San Francisco Over Worker Misclassification Claims

A hospitality staffing company with headquarters in Los Angeles is seeking damages from several competitors, accusing them of gaining an unfair competitive advantage by misclassifying workers as independent contractors, who are generally considered cheaper than employees.

Party Staff claims it lost numerous clients to gig-economy platforms Qwick, Instawork and Tend, which can offer lower prices for staffing services by avoiding the costs of minimum wage, overtime and other employee benefits.

According to legal experts, wage and hour lawsuits are typically filed against companies by employees or former employees, not competing businesses.

Party Staff also sued Aramark and ISS Guckenheimer, two major hospitality and food services companies with contracts with the defendants, according to the lawsuit filed in San Francisco Superior Court on Wednesday.

Last year, Qwick agreed to reclassify thousands of waiters, dishwashers and other workers after San Francisco City Attorney David Chiu sued the company for wage theft through misclassification. As part of the settlement, Qwick was ordered to pay the workers $1.5 million in restitution and $250,000 in civil penalties to the city. Party Staff’s lawsuit still seeks damages from Qwick stemming from its prior practices.

Party Staff’s legal challenge is the first of its kind in the hospitality industry, said Shannon Liss-Riordan, an attorney for the plaintiffs who has represented Uber drivers and other workers in the gig economy.

“Defendants’ unlawful conduct negatively affects competitive conditions by reducing competition between providers and threatens to drive businesses that follow the law out of business,” Riordan wrote in the complaint.

Under California law, workers should generally be classified as employees unless they operate their own business. A big exception is for app-based transportation and delivery companies such as Uber and Lyft, which successfully pushed a 2020 ballot proposition that allows them to keep classifying their drivers as independent contractors.

Last year, the U.S. Department of Labor finalized a new rule seeking to expand employee protections to more workers by making it harder for employers to misclassify them. However, the incoming Trump administration is expected to rescind or weaken that rule.

David Sherwyn, a law professor at Cornell University’s School of Hotel Administration, said the potential impact of Party Staff’s unique lawsuit will depend on how successful the company is in winning monetary damages. The argument that clients would have hired Party Staff if competitors had paid their workers as employees is a difficult one to prove, he added.

“If the court says that those damages are way too speculative and can’t be awarded, then this is not going to be a new frontier because there’s no money in it for the plaintiff’s lawyer,” said Sherwyn, who directs Cornell’s Center for Innovative for Hospitality Labor & Employment Relations.

In a statement, a Qwick spokesperson denied the allegations.

“Business partners choose to work with Qwick over other providers for many reasons, including finding our innovative, tech-driven approach to staffing to be more efficient and superior overall,” the spokesperson said. “We are compliant with all California labor laws and exclusively staff W-2 personnel in the state.”

Tend and ISS Guckenheimer could not be reached for comment. Spokespeople for Instawork and Aramark said their companies do not comment on pending litigation.

“We prioritize compliance with applicable regulations and understand that the growing community of Partners and Pros who use our platform choose Instawork because they trust the quality and reliability we bring to both businesses and workers looking to find and fill local staffing opportunities in a rapidly evolving modern economy,” Kira Caban, head of strategic communications for Instawork, said.