Client Alerts / 05.11.2016

Mere Alleged Misclassification of Employee as Independent Contractor grounds for an alleged NLRA Violation

By: Robert Bowes with Alex Jones

The National Labor Relations Board (the “NLRB”) is taking the remarkable position that misclassifying an employee as an independent contractor, in and of itself, violates Section 7 of the National Labor Relations Act (the “Act”). The NLRB alleges in the Complaint filed in Intermodal Bridge Transport, Case 21-CA-157647, that the employer “has misclassified its employee-drivers as independent contractors, thereby inhibiting them from engaging in Section 7 activity and depriving them of the protections of the [National Labor Relations] Act.” The NLRB’s theory is that when an employer (improperly) deems workers as independent contractors, the employer, in effect, is telling its employees they do not have any Section 7 rights, such as the right to organize. If the NLRB prevails, it would mark an extraordinary departure from the current understanding of the Act.

As a matter of background, when the NLRB receives an unfair labor charge from an employee, it independently investigates the merits of that charge. If the NLRB determines the charge has merit, it then issues a complaint against the employer, detailing the employer’s alleged violations. The Complaint in Intermodal alleges the employer violated the Act by merely misclassifying employees as independent contractors. Traditionally, misclassifying an employee, without some type of actual injury, does not amount to a violation of the Act. For example, an employer does not violate the Act by simply misclassifying an employee as exempt, but the employer does violate the Act when it misclassifies an employee as exempt and fails to pay that employee overtime.

If the judge in the Intermodal case ultimately concludes misclassifying employees as independent contractors is a per se violation of the Act, and if that ruling is ultimately upheld, then employers will need to be more vigilant than ever when determining workers’ status as either employees or independent contractors.  While this case has no bearing on employers who properly classify workers as independent contractors, it is a good reminder that the NLRB is taking a close look at worker classification, which means employers need to as well.