Nike could face more than $530 million in fines for misclassifying thousands of temporary office workers, the Guardian reported Thursday.
Citing “independent reports compiled for the company,” the publication said Nike management’s handling of independent contractors may have left it open to “potentially huge” fines and class-action lawsuits.
According to the Guardian, a July 2022 report compiled by workforce services firm People2.0 looked at 3,670 independent contractors, law firms, individuals and other entities in the U.S who had been paid more than $7.2 billion over three years. People2.0 reportedly found that a quarter of those contractors who had together received more than $1.2 billion in payments may have been incorrectly classified. Nike’s potential liability for these payments totaled $293.2 million.
People2.0 found “similarly large” numbers of incorrectly classified payments in the U.K., Netherlands and Belgium, with Nike facing potential fines of $53.7 million, $76.4 million and $106.8 million, respectively, the Guardian said. The potential fines across all four countries total $530 million.
“There is currently no [fully comprehensive] company-wide process for determining whether an independent contractor [IC] should be engaged as an IC or employee at Nike,” the People 2.0 report stated, according to the Guardian. “People2.0’s risk assessment has revealed a variety of practices and circumstances at Nike, which, in many cases, indicate a high risk of audit failure under the scrutiny of a taxing authority.”
Neither Nike nor People2.0 responded to requests for comment.
The Guardian cited a second report from 2021 as well. Compiled by workforce management company Magnit—then Pro Unlimited—it reportedly found that 63 percent of suppliers receiving “non-employee compensation” had been paid without being assessed by a program designed to ensure payments pass IRS standards. The report estimated Nike could face a potential tax liability of $2.4 million. It also noted that the company could be vulnerable to a class-action lawsuit for retirement, medical benefits and other penalties if workers were found to have been misclassified, the Guardian said.
The article also referenced a Nike practice called “Dim the Lights.” The scheme gives workers time off during quiet periods, including three weeks at the end of the year, two weeks in March and one week in May and August. Staff are paid during these breaks, whereas external temporary workers are not. The report noted that the practice could be a “negative impact to the brand should ETWs voice concern about the time off,” the Guardian reported. The publication said it viewed Nike emails where executives suggested changing the program because it was unfair and might put off applicants.
Nike pulls back on Ja Morant
Just one month after launching its first Ja Morant shoe, Nike appears to be pulling back on the Memphis Grizzlies point guard, removing his sneakers from its online store, after he brandished a gun on Instagram Live for the second time in three months. Morant had been positioned to take the place of Kyrie Irving, now of the Dallas Mavericks, who Nike dropped last year after he promoted an antisemitic movie.
Video shared on social media this weekend shows the basketball star waving a gun as he listens to music. The clip mirrored a similar Instagram Live video from March where Morant brandished a gun in a strip club. The NBA issued an eight-game suspension in response to the March incident, which Morant apologized for at the time.
The Memphis Grizzlies shared a statement on Twitter Sunday saying it had suspended Morant from all team activities pending League review. NBA commissioner Adam Silver said Tuesday, in an interview with ESPN, that the league was in the process of investigating the incident. Morant addressed the incident that same day in a statement shared by ESPN’s Adrian Wojnarowski on Twitter.
“I know I’ve disappointed a lot of people who have supported me,” Morant said. “This is a journey and I recognize there is more work to do. My words may not mean much right now, but I take full accountability for my actions. I’m committed to continuing to work on myself.”
Though Nike continues to list Ja Morant T-shirts and jerseys on its website, the page for “Ja Morant Shoes” now tells visitors “Sorry, we couldn’t find the page you’re looking for.” According to the Wayback Machine, a website that archives webpages, the link was functional as recently as Tuesday. At the time, it only listed Nike’s upcoming Ja 1 “Hunger” release.
The SNKRS website took down its listing for the unreleased colorway during the day Thursday, with the link now returning a 404 Error screen. The SNKRS app, however, still shows the sneaker as releasing May 25.
Also this week, popular running app Strava announced Thursday that it and Nike were partnering to allow users to share activity details across the two companies’ apps. Users will be able to access Nike-branded clubs on Strava, where they will host challenges and curate specialized content from Nike’s coaches and athletes.
Nike Run Club and Nike Training Club users will be able to upload their activity into Strava later this summer. The sneaker giant will begin hosting challenges on the app “later this summer” as well. Strava described the partnership as part of its new roadmap to “rebuild” its in-app Clubs experiences.
“By partnering with Nike, we’re able to connect two powerful global sport communities on the Strava platform to create meaningful spaces for active people to come together daily,” Strava CEO and co-founder Michael Horvath said in a statement.