March 28, 2023

Volume XIII, Number 87


March 27, 2023

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NLRB to Decide Whether Misclassification Is Standalone Violation of the NLRA

The National Labor Relations Board (Board or NLRB) could reverse a 2019 decision holding that honest, albeit mistaken, classification decisions and announcements to employees do not violate the National Labor Relations Act (the NLRA). On March 17, 2022, General Counsel of the NLRB issued a Complaint against Deco Logistics, Inc. d/b/a Container Connection and its affiliates (collectively Deco Logistics), alleging that Deco Logistics violated the NLRA by misclassifying drivers as independent contractors as well as other conduct that allegedly violated the workers’ Section 7 rights to organize, such as interrogating a driver about union activities and retaliating against drivers for assisting the union’s organizing campaign. The Complaint seeks an affirmative order that Deco Logistics reclassify its independent contractors as employees, and compensation for any harm the workers incurred as a result of the misclassification as independent contractors.

The GC issued the Complaint apparently in hopes of overturning the Board’s previous decision in Velox Express, Inc., 368 NLRB No. 61 (2019), which addressed the issue of whether the sole act of misclassifying drivers as independent contractors violates the NLRA. There, the Board concluded that misclassification of drivers as independent contractors (and communicating the classification), on its own, did not violate the NLRA. Although the Board held that Velox ultimately misclassified its drivers as independent contractors, it also held that the mere act of communicating this erroneous classification was not a standalone violation of the NLRA. The NLRB also refused to issue an order directing the employer to reclassify the drivers as employees—the same remedy sought in Deco Logistics. Member McFerran—the current Chair—dissented, stating that the sole act of misclassifying employees unlawfully implies that they have no rights under the NLRA.

The Complaint against Deco Logistics is further evidence of the continuing ideological shift in the Democratic-majority Board, that may ultimately overrule the Board’s prior decision in Velox Express. The Complaint in Deco Logistics does not set forth any allegations about the factors pertaining to misclassification, which may be grounds for dismissal. The lack of any factual allegations demonstrates the GC’s attempt to create a standalone violation of the Act as a matter of law—regardless of whether the company has a good faith belief that the workers are properly classified.

Companies that use independent contractors should consider reevaluating any independent contractor classifications, and whether to reclassify any independent contractors as employees under applicable state and federal law. Otherwise, companies should be able to justify their classifications with documented evidence to substantiate their good-faith belief that the workers are properly classified. Employers that continue to work with independent contractors may also want to minimize communications regarding the classification, to avoid allegations that such communications interfere with workers’ rights under the Act.

Copyright © 2023, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 91

About this Author

Amanda E. Beckwith, Sheppard Mullin, labor and employment lawyer

Amanda E. Beckwith is an associate in the Labor and Employment Practice Group in the firm's San Francisco office. 

Areas of Practice

Ms. Beckwith represents employers in all aspects of employment-related matters in state and federal courts. Her practice includes defending employers against claims of discrimination, harassment, retaliation, wrongful termination, and wage and hour disputes.

Ms. Beckwith also counsels employers on the wide range of employment issues, including employee handbooks, leaves of absence, employee...

Keahn Morris, Sheppard Mullin Law Firm, San Francisco, Labor and Employment Law Attorney

Keahn N. Morris is an associate in the Labor and Employment Practice Group in the San Francisco office.Keahn’s practice focuses on all areas of labor and employment law, with an emphasis on traditional labor law, high-stakes employment-related litigation, and proactive counseling of management-side clients. Recognized by Super Lawyers as a "Rising Star", Keahn was identified as a top rated labor and employment attorney in San Francisco in 2014, 2015, 2016, and 2017. He has significant experience in all aspects of labor-management relations law, including union corporate...

John Bolesta, Lawyer, Employment, Sheppard Mullin Law Firm
Special Counsel

John S. Bolesta is a Special Counsel in the Labor and Employment Practice Group in the firm's Washington, D.C. office

Areas of Practice

Mr. Bolesta represents management in a wide variety of labor and employment litigation matters. He represents clients in a broad range of industries during union organizing attempts and litigation before the National Labor Relations Board, contract negotiation and labor arbitrations. Additionally, he advises clients on best practices in employee relations and the development of comprehensive labor strategies to preserve the...

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James Hays, Legal Specialist, management of labor and employment law

 Mr. Hays is a partner in the Labor & Employment Practice Group in the firm's New York office and co-chairs the firm's Traditional Labor Law Team.

Areas of Practice

Mr. Hays' practice focuses on management labor and employment law. He represents clients in collective bargaining negotiations, labor arbitrations, and all stages of the labor election process, including election campaigns and hearings before the National Labor Relations Board. He also represents clients in employment litigation in federal and state courts, as well as...