How daily supervision and company timeclocks exposed a costly misclassification
A Washington appeals court just handed down a $2 million lesson about subcontractors: calling workers someone else's employees doesn't make it so.
In Newway Forming, Inc. v. City of Seattle, the Washington Court of Appeals published a decision on January 12, 2026, that should make every HR professional take a hard look at their subcontracting arrangements.
At the center of the dispute was Newway Forming, Inc., a concrete-forming company that in 2018 made an oral agreement with Baja Concrete USA Corp. to supply workers for its Seattle construction sites. On paper, Baja was the employer. In practice, things looked quite different.
When Seattle's Office of Labor Standards investigated in 2020, they found workers weren't getting overtime, meal breaks, rest periods, or proper minimum wage. Records were a mess. The violations across multiple workers over two years totaled more than $2 million.
Newway's defense was straightforward: these weren't our employees. Any violations were Baja's problem. The city disagreed, determining that Newway was a joint employer and therefore on the hook for the violations right alongside Baja.
The case went to a 14-day hearing where workers testified about their daily reality. The picture that emerged was telling. Newway foremen gave workers their assignments, answered their questions, and corrected their mistakes. Baja supervisors mostly just dropped workers off and picked them up.
The evidence was damning. Newway installed a timeclock at its trailer and required workers to use it, a requirement not imposed on other subcontractors. Newway reviewed timesheets before payroll processing and was the source of money that reached workers. Newway told Baja how many workers it needed and could bar specific workers from returning to sites.
The workers worked exclusively on Newway projects during the investigation period. Baja had registered in Washington specifically to provide workers to Newway. The cement-finishing work wasn't peripheral but core to Newway's business. In fact, Newway's own employees did identical work, but the company needed more hands.
Workers also used Newway's powered equipment, reported to Newway's trailers, and operated in Newway's world.
The hearing examiner applied the economic reality test, which looks at 13 factors to determine who really employs someone. The key insight is that you can't just count factors like a scorecard. You have to look at the whole picture. The examiner found eight factors pointed toward joint employment.
Newway fought back, taking the case to superior court and then to the Court of Appeals, arguing the hearing examiner had acted illegally. But at oral argument, Newway's lawyer admitted the examiner had used the right legal test. That concession proved fatal because Washington courts reserve statutory writs for extreme situations, not ordinary disagreements about applying law to facts.
Newway couldn't cite binding Washington authority for its position and didn't challenge the underlying facts. The Court of Appeals found the examiner had substantial evidence for each finding and affirmed the penalty.
For HR professionals, the practical lessons are clear. First, labels matter far less than day-to-day reality. Calling someone a subcontractor's employee doesn't protect you if your company exercises real control.
Second, supervision is critical. When your supervisors give daily assignments, answer questions, and correct work, you're acting like an employer regardless of who signs the paychecks.
Third, administrative controls tell the story. Requiring workers to use your timekeeping system, reviewing their timesheets, and approving payment creates an employment relationship even when money flows through another company.
Fourth, the ability to exclude workers from your workplace functions as firing power even if you're not technically terminating their employment elsewhere.
Finally, when work is integral to your core business and performed by people using your equipment at your facilities under your supervision, courts will find an employment relationship exists.
The financial stakes are real. This $2 million penalty included back wages, interest, liquidated damages, and civil penalties. Multiply violations across multiple workers over time, and the numbers climb fast.
As published precedent in Washington, this case joins growing scrutiny of arrangements where companies try to outsource employment obligations along with the work itself.
