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(Reuters) — Delivery service Gopuff has been fined $6.2 million by the state of Massachusetts for improperly classifying nearly 1,000 drivers as independent contractors rather than employees, who are more costly for companies.
Massachusetts Attorney General Andrea Campbell, a Democrat, announced the fines on Thursday as Gopuff prepares for a U.S. initial public offering.
Worker classification is a crucial issue for app-based services such as Uber, Lyft and Grubhub that rely on independent contractors to control costs. Hiring contractors can be 30% cheaper than having employees, who are entitled to an array of benefits and legal protections.
Philadelphia-based Gopuff operates in hundreds of U.S. cities and Britain. A Gopuff spokesperson said the company strongly disagrees with the fines and intends to appeal them.
“Gopuff is focused on giving people the chance to earn with us in whichever way makes the most sense for them,” the spokesperson said.