Breakdown: Arise to Pay $13 Million Following Worker Misclassification, False Advertising Lawsuits

Arise Virtual Solutions, owner and operator of a popular gig-CX platform, will have to pay US$13 million following a triad of lawsuits issued by the Department of Labor (DOL), the Federal Trade Commission (FTC) and the Office of the DC Attorney General.

Case No.1: Arise and the DOL agreed to settle a lawsuit issued last year in which the company was accused of misclassifying tens of thousands of call center agents as independent contractors. According to the DOL, it was the largest workers’ misclassification case in history.

• Arise will compensate allegedly misclassified workers US$3 million. The money will be handed over to third-party administrators in three payments made between December of 2024 and June of 2026.

• The company also agreed to pay, over a “monitoring period” of 12 months, the equivalent of federal minimum wage to agents that use its platform. Minimum wage will also be paid for time spent by agents in Arise’s training platform and certification modules, as well as for overtime.

• Arise will still be allowed to charge agents a platform usage fee, as long as the fee does not put the total paid for service below federal minimum wage.  

Not (quite) guilty: The settlement underscores multiple times that, by agreeing to settle, Arise does not accept any of the wrongdoing claimed by the DOL.

• The DOL, in turn, did not renounce its right to launch more probes against Arise in the future.

Between the lines: The settlement does not speak of misclassified workers or wages owed to them. It sticks to Arise’s terminology of “Service Partners” and “service revenue”. 

• Arise has insisted that it isn’t a provider of customer care services, but a tech company providing a platform that facilitates such services. Agents work for “Service Partners”, which are, in Arise’s view, small-time CX operators.

• It’s been reported that Service Partners tend to be single-person enterprises owned and run by the agents themselves. 

Case No.2: The FTC accused Arise of false advertising. The complaint was issued in early July of this year and settled just days later.

• As part of the settlement, Arise will pay US$7 million in monetary relief to the Comission.

• Arise did not accept any culpability, but agreed to stop making unsupported earnings claims in its advertising.

The claims: The FTC claimed that, between 2019 and 2022, Arise misled potential users of its platform by advertising self-employment opportunities that would allow them to earn up to US$18 or US$14 an hour, depending on the ad. 

• The Commission found that agents using Arise’s platform earned, on average, US$12 per hour. 

• The FTC also condemned the fact that, in its advertising, Arise did not mention that agents would need to purchase their own equipment, pay for training courses and be charged a platform usage fee.

• All of the above violates the Business Opportunity Rule, according to the FTC. This rule  “requires business opportunity sellers to give prospective buyers specific information to help them evaluate a business opportunity.”

Case No.3: In March of this year, Arise agreed to settle a lawsuit launched by the Office of the DC Attorney General in which the company was accused of misclassifying DC-based customer service agents as independent workers. 

• Arise will have to pay US$ 3 million as part of the settlement: 

  • US$2 million for wages owed to more than 250 DC-based CX agents

  • US$939,000 to the District in civil penalties.

• The company will not be allowed to contract DC-based agents anymore, a decision that it found lamentable.

Flashback: Back in 2013, Arise paid US$1.2 million as part of a settlement from a lawsuit which involved 158 allegedly misclassified workers in California. From that point on, the company stopped contracting agents based in the state.

NSAM’s take: Unfortunately, this isn’t Arise’s first rodeo. The company has for years been under the eye of the DOL and other government entities and regulators due to its business practices. None of them have been able to pin the company for any major instance of wrongdoing, with most investigations leading either nowhere or to lawsuits that are ultimately settled.

While Arise was able to achieve settlements once more, it might find itself facing even more scrutiny in the future. Arise is but one of the many, many companies embroiled in controversies over their gig-based business models. Media, government regulators and even the courts have taken increased interest in how fair (or unfair) the gig model is for the people that work within it.

The fact that Arise had to juggle three major US government lawsuits in a period of two years, settling all three over five months, speaks volumes about how much unwanted attention the company has been receiving.

The gig-CX model isn’t as popular as some evangelists would have you believe. However, Arise’s client list shows that there’s a demand for it. And the fact that big names have been soliciting Arise’s services even as it was involved in legal trouble shows that demand for agents is stronger than fear of regulators.

In short: don’t be surprised if more probes and lawsuits are thrown at Arise over the next couple years. Don’t expect any of them to kill their business, though.