[US] Deel criticised for its hiring practices

US lawmakers are calling for a federal investigation of labour practices at fintech turned HR startup Deel, Bloomberg reports. 

A group led by California congressman Adam Schiff has raised questions about Deel’s ability to advise clients on legal compliance while allegedly misclassifying its own employees as contractors.

Mr Schiff and five other Democratic members of Congress wrote a letter on July 26 asking acting US Labor Secretary Julie Su to open an investigation into the company. The letter cited an investigation by Insider and in it, the congresspeople reportedly urged the US Department of Labor to investigate whether Deel had misclassified employees as independent contractors "on purpose to increase their profitability and growth." 

The letter’s contents were first reported by Bloomberg, it came in the wake of allegations from US senator Steve Padilla, reported by TechCrunch last month.

According to TechCrunch, in early July, Senator Steve Padilla sent a letter to California’s Secretary of Labor, alleging that Deel had hired hundreds of employees but classified them as independent contractors. Senator Padilla alleged that by doing so, Deel is “effectively denying them the full suite of employment and social safety net benefits and labor protections they are entitled to, including healthcare, retirement, unemployment insurance, worker’s compensation, collective bargaining, and overtime pay.”

The senator further alleged that Deel “appears” to be advising its own customers (which include big name brands such as Nike, Subway, Reebok, Forever 21 and Klarna) “to misclassify their own employees and evade taxes in California,” as well as avoid paying employee benefits.

In early July, according to Mr Padilla, Deel CEO Alex Bouaziz encouraged companies to leverage “the different ways of employing someone or assigning them as an independent contractor…..and therefore don’t put as much tax liability into your company.” In addition, it is claimed that he encouraged companies to “spend some time on this topic” and offered to provide this as a service, allegedly stating “We can do that for you.” 

When TechCrunch reached out to Deel for comment. Elisabeth Diana - a company spokesperson - provided the following statement:

“These allegations are completely made up and regurgitated from old news, most likely based on competitor hearsay. Compliance is literally what we do, in over 120 countries. We have to understand it for our customers, and we certainly practice it ourselves. Today we have over 50 compliance experts in-house and an external network of country advisors.

"To advise clients on how to misclassify their workers would be at complete odds with our business model. We’ve also created a consortium with external academics called the Deel Lab for Global Employment to study and help prevent misclassification practices. In California, we engage 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 reach out to us for comment or facts prior to publishing his letter. We welcome speaking with him directly to provide factual information.”

Earlier this year, Insider published an article (cited in the congresspeople’s letter) which stated that Deel CEO and co-founder Alex Bouaziz was classified as an independent contractor. According to Senator Padilla, several employees “have reported being shocked to learn they had been hired as long–term contractors despite originally applying as full-time employees, and without the ability to choose.” Senator Padilla’s office reportedly told TechCrunch that the politician has asked for an investigation to determine if the practices mentioned in the article are accurate.

Many of the company’s employees, he said, have access to a range of benefits, including unlimited paid time off, wellness stipends and reimbursements for gym memberships and doctor’s appointments. However, Senator Padilla alleged, they “continue to be denied the full suite of employment and social safety net benefits and labor protections they are entitled to, including healthcare, retirement, unemployment insurance, worker’s compensation, collective bargaining, and overtime pay, among others.”

In a press release, the senator said, “No company is above the law. Deel has been openly flaunting their violation of California labor laws, intentionally misclassifying their employees as independent contractors and denying them critical benefits.

“California is clear on this issue; employees are entitled to benefits and protections. Corporations engaging in malicious employment schemes like this need to be held accountable and these employees need to see their rights restored.”

Mr Bouaziz and Shuo Wang reportedly founded remote-first, San Francisco-based Deel in 2019 as an employer of record with the mission of allowing businesses to hire employees and contractors in other countries “in less than five minutes.” Deel has subsequently evolved its fintech model to what it describes as a “full-stack,” “truly global HR platform”. 

Sources: Bloomberg, Insider and TechCrunch

(Links and quotes via original reporting)

US lawmakers are calling for a federal investigation of labour practices at fintech turned HR startup Deel, Bloomberg reports. 

A group led by California congressman Adam Schiff has raised questions about Deel’s ability to advise clients on legal compliance while allegedly misclassifying its own employees as contractors.

Mr Schiff and five other Democratic members of Congress wrote a letter on July 26 asking acting US Labor Secretary Julie Su to open an investigation into the company. The letter cited an investigation by Insider and in it, the congresspeople reportedly urged the US Department of Labor to investigate whether Deel had misclassified employees as independent contractors "on purpose to increase their profitability and growth." 

The letter’s contents were first reported by Bloomberg, it came in the wake of allegations from US senator Steve Padilla, reported by TechCrunch last month.

According to TechCrunch, in early July, Senator Steve Padilla sent a letter to California’s Secretary of Labor, alleging that Deel had hired hundreds of employees but classified them as independent contractors. Senator Padilla alleged that by doing so, Deel is “effectively denying them the full suite of employment and social safety net benefits and labor protections they are entitled to, including healthcare, retirement, unemployment insurance, worker’s compensation, collective bargaining, and overtime pay.”

The senator further alleged that Deel “appears” to be advising its own customers (which include big name brands such as Nike, Subway, Reebok, Forever 21 and Klarna) “to misclassify their own employees and evade taxes in California,” as well as avoid paying employee benefits.

In early July, according to Mr Padilla, Deel CEO Alex Bouaziz encouraged companies to leverage “the different ways of employing someone or assigning them as an independent contractor…..and therefore don’t put as much tax liability into your company.” In addition, it is claimed that he encouraged companies to “spend some time on this topic” and offered to provide this as a service, allegedly stating “We can do that for you.” 

When TechCrunch reached out to Deel for comment. Elisabeth Diana - a company spokesperson - provided the following statement:

“These allegations are completely made up and regurgitated from old news, most likely based on competitor hearsay. Compliance is literally what we do, in over 120 countries. We have to understand it for our customers, and we certainly practice it ourselves. Today we have over 50 compliance experts in-house and an external network of country advisors.

"To advise clients on how to misclassify their workers would be at complete odds with our business model. We’ve also created a consortium with external academics called the Deel Lab for Global Employment to study and help prevent misclassification practices. In California, we engage 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 reach out to us for comment or facts prior to publishing his letter. We welcome speaking with him directly to provide factual information.”

Earlier this year, Insider published an article (cited in the congresspeople’s letter) which stated that Deel CEO and co-founder Alex Bouaziz was classified as an independent contractor. According to Senator Padilla, several employees “have reported being shocked to learn they had been hired as long–term contractors despite originally applying as full-time employees, and without the ability to choose.” Senator Padilla’s office reportedly told TechCrunch that the politician has asked for an investigation to determine if the practices mentioned in the article are accurate.

Many of the company’s employees, he said, have access to a range of benefits, including unlimited paid time off, wellness stipends and reimbursements for gym memberships and doctor’s appointments. However, Senator Padilla alleged, they “continue to be denied the full suite of employment and social safety net benefits and labor protections they are entitled to, including healthcare, retirement, unemployment insurance, worker’s compensation, collective bargaining, and overtime pay, among others.”

In a press release, the senator said, “No company is above the law. Deel has been openly flaunting their violation of California labor laws, intentionally misclassifying their employees as independent contractors and denying them critical benefits.

“California is clear on this issue; employees are entitled to benefits and protections. Corporations engaging in malicious employment schemes like this need to be held accountable and these employees need to see their rights restored.”

Mr Bouaziz and Shuo Wang reportedly founded remote-first, San Francisco-based Deel in 2019 as an employer of record with the mission of allowing businesses to hire employees and contractors in other countries “in less than five minutes.” Deel has subsequently evolved its fintech model to what it describes as a “full-stack,” “truly global HR platform”. 

Sources: Bloomberg, Insider and TechCrunch

(Links and quotes via original reporting)