Employment Law Cases: Solved with Automation

As Halloween approaches, it’s not ghosts or goblins that scare HR leaders most—it’s compliance failures lurking in the shadows. These real employment law cases show just how quickly manual processes can turn into costly nightmares that haunt companies for years.

Multi-state compliance is complex enough without relying on spreadsheets and sticky notes. When federal agencies come knocking or an employee files a complaint, the consequences ripple through entire organizations. From wrongful termination claims to discrimination lawsuits, these cautionary tales prove that manual HR processes leave companies dangerously exposed.

Key Takeaways

• Worker misclassification and forced arbitration contracts led to years of litigation for SkipTheDishes, with courts ruling their practices unconscionable
• Power Design’s failure to properly classify 1,200+ workers resulted in a $3.75M settlement—the largest workers’ rights enforcement action in D.C. history
• IKEA faced multiple age discrimination lawsuits and paid $566,000 in penalties just for destroying evidence during ongoing litigation

Case 1: SkipTheDishes—Misclassification & Unfair Contracts

SkipTheDishes thought they’d found the perfect workaround. Classify drivers as contractors, add arbitration clauses, and avoid costly employment obligations. Instead, they triggered a class-action nightmare.

The gig platform operated across several regions with thousands of couriers. Just days before the main plaintiff filed her lawsuit in 2018, the company rushed to change their contracts. They added mandatory arbitration clauses preventing class actions. The timing wasn’t coincidental—they knew trouble was coming.

The Violation

The trial court found SkipTheDishes had systematically misclassified workers as independent contractors. The company controlled when, where, and how couriers worked. Yet they denied basic employment protections like minimum wage and sick leave. Their last-minute arbitration clause? The court ruled it unconscionable—designed solely to prevent workers from seeking justice together.

The Consequences

The case dragged through multiple courts for years. With higher courts refusing to hear SkipTheDishes’ appeal in 2024, it cemented the lower court rulings against them. The company faced massive legal fees, reputational damage that spread internationally, and ongoing regulatory scrutiny. Their attempts to avoid fair employment standards backfired spectacularly.

How Automation Could Have Changed Things

Modern compliance platforms would have flagged the misclassification risk immediately. Automated classification tools analyze actual working relationships against state and local standards. Real-time alerts would have been a harbinger of the legal risks in forcing arbitration on existing employees. Instead of scrambling to change contracts at the last minute, SkipTheDishes could have maintained proper documentation from day one.

Case 2: Power Design—Worker Misclassification Settlement

Similarly, Power Design, a multi-state construction contractor, learned that cutting corners on employment classification comes with a massive price tag. Their $3.75 million settlement stands as D.C.’s largest workers’ rights enforcement action ever.

The electrical contractor worked on over 200 construction projects across the D.C. region. They partnered with labor brokers who supplied hundreds of electrical workers. Everyone knew these workers were employees in everything but name. But calling them contractors saved money—until it didn’t.

The Violation

D.C.’s attorneys found Power Design had misclassified more than 1,200 workers as independent contractors. The scheme involved multiple subcontractors and labor brokers working together. Workers didn’t receive minimum wage, overtime pay, or paid sick leave required under D.C.’s statute. The company also failed to pay unemployment insurance taxes, depriving both workers and the district of crucial funds.

The Consequences

The settlements included $1.7 million in restitution to harmed workers and $1.2 million in penalties to D.C. Power Design also had to submit to three years of compliance monitoring. They’re required to reform their subcontracting practices completely. General contractor John Moriarty & Associates also faced liability for their role. The department continues investigating other contractors using similar schemes.

How Automation Could Have Changed Things

Automated compliance systems track worker classification rules across all jurisdictions. They monitor changes in federal laws and local ordinances that affect classification standards. Built-in audit trails document every employment decision. When the DC, New York, or California Department of Industrial Relations investigate (or any other agencies, for that matter), companies have instant access to compliant records. Automated compensation calculations also ensure proper withholding and tax payments from day one.

Case 3: IKEA—Age Discrimination Lawsuits

IKEA’s corporate culture allegedly favored youth over experience. Multiple age discrimination lawsuits starting in 2018 exposed systematic bias in promotions and training opportunities. The furniture giant’s attempts to defend these practices only made things worse.

The retailer operated stores across the U.S. with thousands of employees over 40. Plaintiffs alleged IKEA used coded language like “high potential” to mean younger workers. Their leadership programs mysteriously selected employees in their 20s while rejecting older applicants with better qualifications.

The Violation

Federal courts found evidence of a hostile work environment where age bias infected promotion decisions from top to bottom. IKEA managers openly expressed preferences for younger employees as “future leaders.” The company’s Aspire leadership program rejected older workers repeatedly while accepting less-qualified younger applicants. Training opportunities, promotions, and development programs systematically excluded workers over 40.

The Consequences

IKEA faced five separate age discrimination lawsuits that dragged on for years. In 2024, they paid $566,000 just for destroying email evidence after being ordered to preserve it. The lawsuits resulted in substantial settlements, massive legal fees, and irreparable reputational damage. Federal agencies like the EEOC increased scrutiny of their employment practices nationwide.

How Automation Could Have Changed Things

Specialized compliance platforms can automatically track promotion patterns and flag potential discrimination risks. They maintain tamper-proof records of all employment decisions and training assignments. Anti-discrimination policies get updated automatically as laws change. When termination or demotion decisions affect protected classes, the system requires documented business justifications. Meanwhile, centralized training trackers ensure equal access to development opportunities regardless of age.

Case 4: Chipotle—I-9 & Documentation Penalties

Chipotle’s rapid expansion created a documentation disaster. With thousands of employees across hundreds of locations, their manual I-9 processes couldn’t keep up. Federal investigations revealed widespread violations that could have been easily prevented.

The restaurant chain experienced high turnover typical of the food service industry. Each new hire required proper I-9 documentation within strict deadlines. Store managers juggled multiple responsibilities while trying to maintain compliant records. Something had to give—and it was compliance.

The Violation

Immigration and Customs Enforcement audits revealed systematic I-9 violations across Chipotle locations. The company failed to properly complete, retain, and make available I-9 forms as required by law. Some locations backdated forms to hide violations. Others lost documentation entirely. The violations weren’t isolated incidents but widespread failures of their manual system.

The Consequences

Chipotle fired hundreds of workers after federal audits in Minnesota, Virginia, and Washington D.C. They faced ongoing federal investigations and SEC subpoenas regarding their hiring practices. The company implemented E-Verify and new documentation systems—but only after substantial reputational damage. As Chipotle found out, fines for I-9 violations can reach $2,507 per form, with thousands of forms potentially affected.

How Automation Could Have Changed Things

Automated I-9 workflows ensure every form is completed on time, while digital retention systems store documentation for the exact period required. Built-in alerts notify HR when reverification is due for expiring work authorizations, reducing the risk of oversight. Centralized dashboards provide instant visibility into compliance status across all locations. And when a federal audit arrives, companies can produce organized, audit-ready records with a single click.

Preventing Failures With Compliance Automation

These nightmares share common themes: manual processes, inconsistent policies, and reactive scrambling when problems surface. Modern compliance automation transforms these vulnerabilities into strengths.

Consistency becomes automatic when systems apply the same rules across all jurisdictions. Every worker gets classified correctly based on actual job duties, not convenience. Every contract includes required language for that specific location. And anti-discrimination policies update automatically as laws change.

As a result, accuracy improves dramatically through automated checks and workflows. No more missed deadlines or lost paperwork. Instead, real-time monitoring catches issues before they become violations. When federal agencies or state regulators investigate, every required document is instantly available.

Such visibility means HR leaders always know their compliance status. Again, centralized dashboards show risks across all states and departments, while robust audit trails document every decision and action. When an employment lawyer needs documentation for defense, it’s all there.

Scalable automated platforms let companies grow without multiplying compliance risks. Adding employees in new states no longer means scrambling to understand local laws. The system already knows requirements for every jurisdiction, and automated updates keep pace with regulatory changes nationwide.

Moving Forward with Mosey

Compliance failures are a constant threat. As we just saw, left unchecked, they can come back to haunt even the biggest companies. These cases prove that manual processes aren’t just inefficient—they’re dangerous.

Unfortunately, multi-state compliance continues growing in complexity as remote work expands and regulations multiply. Now, companies can’t afford to rely on spreadsheets and good intentions. The stakes are too high, and the penalties too severe.

That’s where Mosey steps in. Our compliance automation platform can prevent many of these nightmares before they start. From automated entity registration to real-time compliance monitoring, Mosey transforms HR compliance from a constant scramble into an actual, bonafide competitive advantage. We handle those complexities so you can focus on growth, not paperwork.

Ready to exorcise the compliance demons from your HR department? Schedule a demo with Mosey today to see how automation keeps compliance nightmares at bay.

FAQs

What are the most common compliance risks for multi-state employers?

The biggest risks include worker misclassification, missing state registrations, outdated employee handbooks, and inconsistent policy application. Each state has unique requirements for overtime, sick leave, and termination procedures. Manual tracking virtually guarantees violations as laws change constantly across jurisdictions.

Why are manual processes dangerous for compliance?

Manual processes create inconsistencies, documentation gaps, and missed deadlines that regulators easily identify. Human error increases with complexity—and multi-state compliance is incredibly complex. When investigations occur, missing or incorrect documentation becomes evidence of negligence, leading to higher penalties.

What are examples of compliance automation?

Compliance automation includes automated worker classification based on job duties, digital I-9 workflows with deadline tracking, and real-time policy updates across jurisdictions. Systems can automatically generate state-specific handbooks, track training completion, and maintain audit-ready documentation for all employment decisions.

How does automation help during audits?

Automation maintains complete audit trails and centralized documentation for instant access during investigations. Every employment decision, policy update, and compliance action gets logged automatically. Instead of scrambling to find paperwork, companies can produce comprehensive reports showing proactive compliance efforts.

Can automation prevent discrimination and harassment claims?

Automation creates transparent, consistent processes that reduce discrimination opportunities. Systems track promotion patterns, flag potential bias in decisions, and require documented justifications for adverse actions. While automation can’t eliminate all risks, it provides strong defenses by showing systematic fair treatment and proper documentation of all employment decisions.

Read more from Mosey:

• Manual Compliance Risks: Insights and Tips for HR
• Multistate Compliance Mistakes You’re Still Making
• Compliance Deadline Management Best Practices
• Mosey 2025 Multi-State Compliance Benchmark Report
• Consequences of Non-Compliance: Spooky Stories and Insights
• Florida Sick Leave Laws: Key Facts for Employers