With the Complaint issued recently by the National Labor Relations Board’s (“NLRB”) Regional Director in Los Angeles, the NLRB appears poised to enter the fray on the issue of employer misclassification of workers as independent contractors instead of employees. The NLRB’s Complaint alleges that Intermodal Bridge Transport “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 (“NLRA”). Section 7 of the NLRA is the provision that provides employees with the right to form or join unions and engage in protected concerted activities to address or improve working conditions. The NLRA’s protections do not extend to independent contractors.
Misclassification as an unfair labor practice was only one of a number of allegations against the employer in the complaint, which also included the more typical charges that the employer had questioned employees about union activity, promised more work for those who refrained from engaging in union organizing, and threatened job loss for those who participated in such activities. The Regional Director’s decision to bring a complaint of misclassification as an unfair labor practice appears to be consistent with a recently issued memorandum issued by NLRB General Counsel Richard Griffin, in which he identified his initiatives and policy concerns as those “involving the employment status of workers in the on-demand economy” and “cases involving the question of whether the misclassification of employees as independent contractors” violates the NLRA. This expansive view of the NLRA’s proscriptions has the potential to further expand the legal risks for those employers who misclassify workers as independent contractors.
The NLRB’s interest in worker misclassification issues only adds to what has become a huge headache for employers at the federal level. The U.S. Department of Labor (DOL) has taken an increasingly aggressive enforcement stance in recent years on the issue of misclassification of employees as independent contractors, on the theory that misclassification lowers overall tax revenues for the government and creates an uneven playing field for employers who properly classify their workers (The Financial Risks to Employers of Misclassification of Employees as Independent Contractors). The Obama Administration concluded in 2012 that a federal crackdown on employer misclassification would yield more than $7 billion in revenue over a ten year period.
With increasingly aggressive enforcement by the DOL and now, apparently, also the NLRB – and with large-scale litigation of worker misclassification claims on the rise – employers should exercise great care when making decisions about how to characterize relationships with workers.