Misclassification of Independent Contractor is Violation of NLRA, ALJ Rules
The misclassification of an independent contractor is an unfair labor practice under the NLRA, according to Administrative Law Judge Dickie Montemayor. Intermodal Bridge Transp., No. 21-CA-157647 (Nov. 28, 2017).
ALJ Montemayor said that, because such misclassification chills future concerted activity and necessarily “deprives and conceals available protections” afforded to employees under the NLRA, misclassification in and of itself is a violation of the Act.
Intermodal Bridge Transportation (IBT) used independent contractor drivers to move shipping containers between customer locations in the Los Angeles area to ports and rail hubs. The drivers leased their trucks from IBT and operated under IBT’s operating authority. Further, drivers were subject to IBT policies, were required to sign a variety of forms, had no control over their customers, and did not negotiate their pay rates. Although drivers could choose which days to work and their start time, they could not choose their shifts. Drivers paid certain costs to IBT and received payment for each container they moved.
The NLRB General Counsel issued a complaint following an organizing campaign by the International Brotherhood of Teamsters alleging violations of the NLRA. All of the GC’s allegations depended on whether the drivers were statutory employees protected by the Act.
Relying on the Board’s ruling in FedEx, 361 NLRB No. 55 (2014), the ALJ concluded that, under common law agency principles, drivers were misclassified as independent contractors and decided they actually were employees covered by the Act.
The ALJ then considered whether the misclassification was a mechanism that only triggers the applicability and protections of the Act or whether the misclassification itself can constitute a violation.
Despite noting the lack of decisional authority supporting the GC’s argument that misclassification is a per se violation of the Act, the ALJ agreed that certain conduct can chill future Section 7 activity or can be used as a “preemptive strike” to prevent employees from engaging in protected concerted activity. According to the ALJ, “[F]rom a practical standpoint, misclassification not only serves to chill future concerted activity but deprives and conceals available protections these employees have under the Act.” Further, because interference and restraint of Section 7 rights flows directly from misclassification, the ALJ explained, the misclassification itself rises to the level of a per se violation of Section 8(a)(1).
The ALJ directed IBT to cease and desist from misclassifying its employees and make employees whole for any losses of earnings and other benefits, including reimbursing employees for consequential harm as a result of the misclassification.
If the ALJ’s ruling is appealed by the employer, it is uncertain what action and position the GC will take and how the Board will rule. On December 1, the new General Counsel issued a Mandatory Submissions to Advice memo in which he withdrew an initiative of his predecessor to argue to the NLRB that an employer’s misclassification of employees as independent contractors in and of itself violates Section 8(a)(1) of the NLRA. In light of the memorandum, if Intermodal appeals the ALJ’s ruling to the Board, the new GC could side with the employer.
Despite this uncertainty, misclassification is a minefield for employers. No matter what happens with this case, employers should review their practices for classifying workers.