Lukas Biewald, CEO of CrowdFlower at their Mission District offices.

CrowdFlower, a tech company based in the Mission District, boasts on its website that it has “the world’s largest workforce,” performing hundreds of millions of tasks for web-based client companies. Now one of those virtual workers has filed a lawsuit in federal court charging that CrowdFlower broke the law by paying less than the federal minimum wage of $7.25 an hour.

An Oregon man, Christopher Otey, brought the action on behalf of himself and others who found work through CrowdFlower. But unlike most employers, CrowdFlower — which vigorously denies any wrongdoing — said it had no idea who Otey was.

Based 723 miles away from San Francisco in Astoria, Oregon, Otey worked online for the Internet-based company’s clients, who use workers to do things like identify people in photos and verify phone numbers — minute, repetitive tasks that are too subjective and subtle for computers to perform.

To CrowdFlower, Otey is one of many workers doing remote piecework in the new crowdsourcing industry that is changing the employment landscape. The lawsuit, filed Oct. 26 in U.S. District Court for Northern California, alleges that the company violated the Fair Labor Standards Act by paying an average $1 to $2 an hour.

CrowdFlower’s 2011 revenues surged 300 percent from the prior year, making it one of the hottest tech companies in the Bay Area, according to a press release distributed over BusinessWire last Feb. 27. The company’s virtual community of workers has completed over 750 million tasks for clients.

But with labor migrating from brick and mortar workplaces to a cloud-based workforce, key issues remain undefined.

“The legal territory is uncharted – almost entirely uncharted,” said Alek Felstiner, an attorney who has written a number of articles on crowdsourcing and labor laws. “I do think it’s going to be a question that grows in significance as the industry grows. More and more people are going to be doing this distributed work.”

CrowdFlower contends that labor laws don’t apply to this new form of labor, where individuals around the globe complete micro-tasks for compensation that can range from conventional currency and airline miles to online gaming points.

It’s an unresolved issue, because currently there are no labor laws that describe this kind of work and workers.

“We’re definitely not an employer in the legal sense,” said Lukas Biewald, CrowdFlower’s CEO and cofounder. “These are definitely not employees as the law defines employees.”

Crowdsourced workers do things like confirm addresses, check photos to make sure they’re not obscene and even write poems, Biewald said. The tasks encompass anything a company could request workers to do via an Internet connection.

Typically, these tasks are tiny and quick. For each micro-task, workers get micro-compensation. The company argues that this novel form of home-based labor provides new options that benefit workers.

“I think what we’re doing is providing a new way for people to make money from their homes,” said Biewald. “And I think it’s really good for people. I wouldn’t be doing this if I didn’t think it was good for the world.”

As an example, Biewald points to Robert Munro, a computational linguist who says CrowdFlower helped him create communication networks and location tools in the days following Haiti’s 2010 earthquake. Munro says his workers were paid about $6 an hour for his humanitarian crowdsourcing project.

Attorneys who spoke for Mr. Otey described his compensation level as much lower.

“Mr. Otey is somebody who seeks to maintain his financial sustenance, and the way he can do it is to work a lot of hours making extremely low wages,” said Mark Potashnick.

Crowdsourced work is Otey’s sole source of income, according to Potashnick and co-counsel Ellen Doyle. Crowdsourced workers make on average $1 to $2 an hour, they said. Otey is seeking unspecified compensation, described by the lawyers as “a substantial amount for him.”

The case between Otey and CrowdFlower basically comes down to the question of whether the company’s workers are contractors or employees. According to Otey and his attorneys, he’s an employee, while to CrowdFlower he’s a contractor.

“I just don’t think this is an employment relationship where you could even count the hours,” said Biewald. “I mean, these people aren’t on the clock. I’m not telling them they have to show up.”

But according to attorneys Doyle and Potashnick, crowdsourcing does constitute employment.

“People are considering this to be work they do for an income, as opposed to Wikipedia where people understand that they’re doing a service for a general public good,” Potashnick said.

People who want to work for CrowdFlower go to its website, where it lists available tasks. These may come from one of CrowdFlower’s clients, such as Skout, a San Francisco-based mobile network for meeting people. When a task is completed, Skout technically pays for it. But workers never actually see Skout and the money comes through CrowdFlower.

Asked for Skout’s reaction to issues raised by the Otey lawsuit, Karen Barker, the company’s vice president for trust, safety and community, declined to comment.

The issue of who employs workers like Otey is unresolved.

“If you work at a grocery store, the grocery store company is who has to pay you,” said Felstiner. He describes these as one-to-many working relationships. With crowdsourcing, many people work for many companies at once.

“Normally, whatever company is listed on your paycheck is who has to pay you,” Felstiner said. “And that’s just not the way the crowdsourcing industry works. It’s a many-to-many relationship.”

Crowdsourcing is new, but its potential to redefine labor is similar to the way in which Wikipedia, launched in 2001, redefined the idea of an encyclopedia. As crowdsourcing grows, companies, courts and the government will have to define these working relationships.

“A good analogy is Internet commerce,” said Felstiner. “How you make and enforce contracts online, and how you tax commerce online, are questions [that] became so pressing that they were addressed by courts and legislation. [Those questions] are going to migrate to crowds of people and clouds, rather than brick and mortar buildings and traditional employment relationships.”

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  1. Crowdflower/Dolores is one of the worst ’employers’ on mturk. There’s a number of people who pay better there, and I’d recommend workers deal with them instead of slaving for these chumps. I wish I could block them off my search results, as it just slows me down.

  2. I think this is just a way for a couple of lawyers to make some money. Those class actions pay well, but not for the claimant.

  3. I’m a person who does cloud work or micro work and I make $10.00-12.00 or more an hour. The way I make so much is by working hard and not working for people that under pay there work, but I am an independent contractor who can choose the work I want to do and when I want to do it and I get to work in my pj’s take all the breaks I want. So sorry MR. Otay could not figure out how to work and make a profit but that is his problem for choosing to work for pennies

  4. What slimy labor practices. “Micro-compensation”? Did he says that with a straight face?
    How is underpaying workers/contractors/whatever “good for the world”??

    1. We’re not employees, we’re independent contractors. He doesn’t have to do the work, simple as that.

      1. Sure Kelsey,
        Neither do farm laborers. Tech companies have been hiding behind contract labor for some time. I honor that you are standing up for a company you believe in. However, you must understand that labor laws are to protect everyone. If a company can afford pool tables, stocked kitchens, and game consoles for their employees why not ethical pay and benefits. It is a slippery slope. All employees deserve a livable wage even if they are part time.

        1. I understand that, but the workers determine the market. If workers like Mr. Otey refused to work for companies like CrowdFlower then they would be forced to bring up their wages.

          Two other points about this that I’d like to bring up is that CrowdFlower does not offer these jobs exclusively to US based workers. A worker in another country has just as much access to these hits as an American worker does. Point number two is that these are individually paid tasks. So if it takes me 30 seconds to do a $0.10 task and it takes you a full minute (either due to you skill, computer speed, internet speed or whatever), I’m making twice as much as you are, per hour ($12/hr vs $6/hr). What metric would you base fair wages on when the speed and dedication of the worker plays a huge role in determining what they make.

  5. My primary source of income is from crowdsourcing, but the $1-2/hr estimate given by Mr. Otey’s counsel is way off base for the typical worker. I belong to a group consisting of dozens of workers who all make above minimum wage (and well beyond) doing this type of work. Yes, CrowdFlower notoriously under prices their tasks, but most people that I’ve encountered figure that out within their first week of work and move on to better paying tasks. All this lawsuit does is make those of us trying to make a living at this look bad.