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Labor Board: Misclassifying Worker as Independent Contractor Does Not Violate NLRA

It does not violate the National Labor Relations Act (NLRA) if an employer mistakenly misclassifies its employees as independent contractors, the National Labor Relations Board (NLRB) has decided. Velox Express, Inc.368 NLRB No. 61 (Aug. 29, 2019). Chairman John Ring and Members Marvin Kaplan and William Emanuel were in the majority. Member Lauren McFerran dissented from the portion of the decision holding that misclassification is not a separate violation.

Employers no longer have to worry about incurring unfair labor practice liability if their classification of workers is mistaken.

Background

Velox Express operated a courier service. In 2016, it engaged drivers classified as independent contractors to drive to hospitals and other medical facilities to collect medical samples for diagnostic laboratories.

Jeannie Edge was an independent contractor driver for Velox until her contract was terminated in August 2016. Edge filed an unfair labor practice charge with the NLRB. In an unfair labor practice complaint, the NLRB’s General Counsel (the Board’s chief prosecutor) claimed that Edge was an employee, not an independent contractor, and that Velox had violated the NLRA: (1) by discharging her for engaging in protected concerted activity; and (2) by merely misclassifying its couriers as independent contractors.

After an unfair labor practice trial, Administrative Law Judge Arthur Amchan found the couriers were employees and not independent contractors. The judge applied the then-existing NLRB test for determining whether individuals are employees or independent contractors (FedEx Home Delivery, 361 NLRB 610 [2014]). Judge Amchan also decided the employer had violated the NLRA by virtue of its misclassification of the couriers as independent contractors. (The Board overruled FedEx Home Delivery in SuperShuttle DFW, Inc., 367 NLRB No. 75 [Jan. 25, 2019]. For more on the SuperShuttle decision, see our article, Labor Board Returns to Pre-2014 Test for Determining if Individual Is an Independent Contractor.)

Board Decision

Although SuperShuttle sets forth a test that is more likely than the previous one to lead to a finding that a worker is an independent contractor, the NLRB ruled the Velox couriers were employees. Therefore, they were protected by the NLRA and Edge’s discharge for complaining to management about misclassification of its drivers violated the NLRA.

However, the NLRB disagreed with the judge on whether merely misclassifying employees as independent contractors violated the NLRA. The NLRB determined that this case turned on the employer’s communication to its workers that they are classified as independent contractors, which invoked Section 8(c) of the NLRA.

Section 8(c) states:

The expressing of any views, argument, or opinion, or the dissemination there¬of, whether in written, printed, graphic, or visual form, shall not constitute or be evidence of an unfair labor practice …, if such expression contains no threat of reprisal or force or promise of benefit.

The Board ruled that an employer’s decision to classify its workers as independent contractors is privileged by Section 8(c) because it is the formation of a legal opinion regard¬ing the status of those workers. Further, the Board held, “the communication of that legal opinion is no less protected by Section 8(c) if it proves to be erroneous” because “[e]rroneously communicating to workers that they are independent contractors does not, in and of itself, contain any ‘threat of reprisal or force or promise of benefit.’”

“Standalone Misclassification” Violation Rejected

The Board rejected the argument for a “standalone misclassification” violation — that simply misclassifying an employee as an independent contractor inherently coerces employees in the exercise of their Section 7 rights, regardless of the employer’s intent. The Board called it “a bridge too far” to conclude that an employer coerces its workers by advising them they were classified as independent contractors.

The Board also discussed important legal and policy concerns that weighed against finding a standalone misclassification violation. Key among them were the many federal, state, and local laws and regulations that apply different standards to determine independent contractor status. An employer’s classification decision may be correct under certain laws, but incorrect under the NLRA. Thus, a standalone misclassification violation would assure substantial uncertainty and protracted litigation, which may cause employers to forgo independent contractor relationships. Moreover, Congress expressly excluded independent contractors from the definition of employee under the NLRA to preserve independent contractor relationships. In addition, in First National Maintenance Corp. v. NLRB, 452 U.S. 666, 679 (1981), the U.S. Supreme Court said that an employer “must have some degree of certainty beforehand as to when it may proceed to reach decisions without fear of later evaluations labeling its conduct an unfair labor practice.”

In keeping with the NLRA’s stated purpose to “eliminate the causes of certain substantial obstructions to the free flow of commerce” and to avoid creating new obstructions, the Board rejected the contention that a standalone misclassification violates the NLRA.

Jackson Lewis P.C. © 2020National Law Review, Volume IX, Number 246

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About this Author

Philip B. Rosen Jackson Lewis  Preventive Practices Lawyer & Collective Bargaining Attorney
Principal

Philip B. Rosen is a Principal in the New York City, New York, office of Jackson Lewis P.C. He is a member of the firm's Board of Directors and co-leads the firm's Labor and Preventive Practices Group. He joined the firm in 1979 and served as Managing Partner of the New York City office from 1989 to 2009.

Mr. Rosen lectures extensively, conducts management training, and advises clients with respect to legislative and regulatory initiatives, corporate strategies, business ethics, social media, reorganizations and reductions-...

212-545-4000
Jonathan J. Spitz, Jackson Lewis Law Firm, Labor Employment Attorney, Atlanta
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Jonathan J. Spitz is a Principal in the Atlanta, Georgia, office of Jackson Lewis P.C. He is Co-Leader of the firm’s Labor and Preventive Practices Group.

Mr. Spitz lectures extensively, conducts management training, and advises clients with respect to legislative and regulatory initiatives, corporate strategies, business ethics, social media issues and the changing regulatory landscape. He understands the practical and operational needs of corporate America, helping design pragmatic strategies to minimize risk and maximize performance. He has represented management in dozens of counter-organizing drives and participated in countless unfair labor practice proceedings, discrimination charges and other matters before the National Labor Relations Board, the Equal Employment Opportunity Commission and other federal and state administrative agencies, as well as in collective bargaining, arbitration and in employment litigation before state and federal courts. Mr. Spitz regularly counsels employers in employee relations and discipline and discharge matters, and also assists employers in drafting employment policies and in complying with the Family and Medical Leave Act, drug testing laws and regulations, the Americans with Disabilities Act and other federal and state employment laws.

404-586-1835
Howard Bloom, Jackson Lewis, labor union attorney, unfair practice investigations lawyer, employment legal counsel, bargaining law
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Howard M. Bloom is a Principal in the Boston, Massachusetts, office of Jackson Lewis P.C. He has practiced labor and employment law representing exclusively employers for more than 36 years.

Mr. Bloom counsels clients in a variety of industries on labor law issues. He trains and advises executives, managers and supervisors on union awareness and positive employee relations, and assists employers in connection with union card-signing efforts, traditional union representation and corporate campaigns, and union decertification...

617-367-0025
Suellen Oswald, Jackson Lewis, Labor Arbitration Lawyer, Automotive Unions Attorney
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Suellen Oswald is a Principal in the Cleveland, Ohio office of Jackson Lewis P.C.

With more than 25 years of experience in labor and employment law and a nationwide practice, Ms. Oswald is an experienced, trusted labor negotiator who has worked with international conglomerates, as well as Fortune 100 companies and medium and small businesses. She has successfully led hundreds of labor negotiations, union organizing campaigns and litigated unfair labor practice charges, labor arbitrations and dozens of cases through...

216-750-4339