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A California senator is urging the state’s Labor and Workforce Development Agency to investigate the business practices of fintech-turned-HR startup Part.
Last week, Senator Steve Padilla (D-San Diego) sent a letter to Stewart Knox, California’s Secretary of Labor, alleging that Deel had hired hundreds of employees but classified them as independent contractors. In doing so, Senator Padilla accused, Deel is effectively denying them the full package of employment and social safety net benefits and job protections they are entitled to, including health care, retirement, unemployment insurance, workers’ compensation, collective bargaining and overtime. ”
Furthermore, Senator Padilla claimed that Deel “appears” to be advising his own clients (which include companies like Nike, Subway, Reebok, Forever 21 and Klarna) “to misclassify their own employees and evade taxes in California”, and to prevent them from paying employee benefits. Earlier this month, according to Padilla, Alex Bouaziz, CEO of Deel, encouraged companies to take advantage of “the different ways of hiring someone or appointing them as an independent contractor… and therefore not as much tax in your company to stab.” He also encouraged companies to “spend some time on this topic” and offered to offer this as a service, stating “we can do that for you”.
TechCrunch reached out to Deel for comment and Elisabeth Diana, a spokesperson for the company, issued the following statement:
“These allegations are completely made up and swallowed up from old news, most likely based on competitor rumours. Compliance is literally what we do, in over 120 countries. We need to understand it for our customers, and we certainly practice it ourselves. Today we have more than 50 in-house compliance experts and an external network of country advisers. Advising clients on how to misclassify their employees would be contrary to our business model. We have also created a consortium of outside academics called the Deel Lab for Global Employment to investigate and help prevent misclassification practices. In California, we employ a handful of contractors for services, and in the US, contractors represent less than 1% of our workforce. Claims of misclassification there are ridiculous. Unfortunately, Senator Padilla did not contact us for comment or facts before publishing his letter. We welcome talking to him directly to provide factual information.
The spotlight on Deel’s hiring practices came to light earlier this year when Insider published an article which showed, among other things, that even CEO and co-founder Alex Bouaziz was classified as an independent contractor. According to Senator Padilla, multiple employees have reported being shocked Unpleasant to learn she was hired as long–term contractors despite initially applying as full-time employees, and without the possibility to to elect.” Senator Padilla’s office told TechCrunch that the politician has asked for an investigation to determine whether the practices cited in the article are correct.
Many of the company’s employees, he said, have access to a range of benefits including unlimited paid time off, wellness benefits and fees for Fitness center memberships and doctor dates. But, Senator Padilla claimed, they “continue.” are denied the full range of employment and social security net benefits and labour protections she Are entitled on, inclusive healthcare, pension, unemployment insurance, workers compensation, collective bargaining, And overtime, among others others.”
“No company is above the law. Share openly flaunts their violation of California labor laws, deliberately classifies their employees as independent contractors and denies them critical benefits,” Sen. Padilla said in a press release.. “California is clear on this issue; workers are entitled to benefits and protections. Companies that engage in these types of rogue employment programs must be held accountable and these workers must see their rights restored.”
In January, TechCrunch reported that Deel had done just that reached $295 million in annual recurring revenue (ARR) by the end of 2022 and that it was profitable, Bouaziz said. The startup, which offers global payroll and other services to companies around the world, was worth $12 billion at the time of the last increase, although the current valuation is not known. It operates on a SaaS business model, which means it charges subscription fees for its software.
Bouaziz and Shuo Wang started remote, San Francisco-based Share as a registered employer (EWC) in 2019 – with the mission of enabling companies to hire workers and contractors in other countries “in less than five minutes” . Share also says it gives companies the ability to pay teams in more than 150 currencies with “just one click”. It has since developed its strictly fintech model into what it describes as one “full stack”, “true global HR platform” designed “to manage your entire compliant workforce in just one system – from direct employees to international employees and everything in between.” It has more than 2,000 employees in 90 countries.
Senator Dave Cortese (D-San Jose), chair of the Senate Labor, Public Employment, and Retirement Committee, stated that an independent contractor “is a specific designation for self-employed individuals or firms engaged in contract work.”
He added: “It is not a gimmick for organizations to avoid paying for employee health care and other benefits or reduce their tax liability… Any company that breaks the law will be taken to court, and it certainly should not be a matter to advise other companies on employment law. .”
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