Magic Leap Sued Over Misclassifying Workers

A former Magic Leap Inc. worker is suing the company, claiming it misclassified hundreds of employees as independent contractors in order to avoid paying taxes on nearly $36 million in wages.

Kimberly Couto, whose job was to manage the gadget developer’s contract workers, said she complained in a meeting with Magic Leap management and lawyers in November about the practice. She was fired the next day, according to a lawsuit in Broward County, Florida, where Magic Leap is based.

“We are confident the complaint is entirely without merit and will vigorously defend the company against these baseless claims,” Magic Leap said in an emailed statement. “We believe the lawsuit, which is one of many filed by the same Florida-based law firm, is part of an ongoing effort to exploit Magic Leap’s high-profile stature and financial resources through blatant abuse of process.”

Magic Leap is backed by more than $2.3 billion in funding from the likes of Alphabet Inc. and Alibaba Group Holding Ltd. It has yet to release a product but intends to sell a pair of computerized glasses later this year that blend virtual images with the real world. In the meantime, the company has been involved in a steady stream of litigation with employees. Another worker sued the company last year, claiming it mistreated women in the office; the suit was later settled. Last month, Magic Leap sued an employee, saying he was threatening to extort the company by bringing a lawsuit alleging age discrimination.

Couto’s suit was filed two days after Magic Leap said it had raised yet another round of financing—this time, $461 million mostly from Saudi Arabia’s sovereign wealth fund. In the suit, Couto claimed Magic Leap regularly identified talented employees at other tech companies, had staffing agencies poach them and then brought them to Magic Leap as contractors to avoid non-compete agreements.

According to Couto’s LinkedIn page, she managed 250 contractors and 75 consultants. Her complaint said the company treated many of them like employees, right down to giving them access to staff perks like fresh-squeezed orange juice machines and free treats from ice-cream trucks. Contractors worked the equivalent of full-time hours set by the company and only for Magic Leap, she said.