The National Labor Relations Act (Act) protects the right of workers to organize (and not to organize) and to engage in other “protected concerted activities”. These are fundamental rights guaranteed to workers under Section 7 of the Act.
Crucially, the protections of the law extend only to “employees”—not “independent contractors.”
The number of workers referred to as “independent contractors” has steadily increased over the past decade. Similarly, there has also been an increase in the number of independent contractors being misclassified as contractors rather than employees. Such misclassification of workers as independent contractors creates significant problems for employers, including state and federal wage and hour laws, and state unemployment insurance and workers’ compensation laws. Now it looks as if an incorrect classification will soon lead to consequences under the law again.
Over the past several presidential administrations, the National Labor Relations Board (Board) has grappled with the question of whether, barring any obvious conduct that might itself break the law, misclassifying an employee as an “independent contractor” itself constitutes a per se Violation of the law.
President Biden’s NLRB is expected to return to a precedent set by President Obama’s board, which finds such misclassifications to be against the law and may soon have the opportunity to rule on the matter. When this reversal occurs, we have another example of board decisions reflecting the policies of the incumbent government.
The Trump Board previously found no independent violation and overruled the Obama Board
The Obama administration first addressed employee misclassification as distinct violations of the law in a memorandum issued in December 2015, requiring the regional offices of the Board of Directors to investigate complaints of employee misclassification as distinct violations.
In accordance with this policy, an Administrative Judge (ALJ) ruled in September 2017. Velox Express, Inc. that by misclassifying its employees as independent contractors, the employer “restrained and interfered with their ability to engage in protected activities, effectively telling them that they are not protected by Section 7 and could therefore be disciplined or fired” , because they engage in protected concerted activities . Case 15-CA-184006 (NLRB ALJ 25 Sept 2017).
Two months later, another ALJ agreed Veloxin which she stated that such a misclassification “reduces to the level of a per se Violation of the law. Intermodal bridge transportCases 21-CA-157647, 21-CA-177303 (NLRB ALJ 28 Nov 2017).
When President Trump restored Republican control of the board, he immediately reversed course.
On February 15, 2018, the Trump Board invited briefs on the misclassification problem.
On August 29, 2019, the NLRB reversed the ALJ’s ruling in Velox, ruling that misclassifying an employee as an independent contractor did not in itself per se Violation of the law. 368 NLRB No. 61, *8 (2019).
The Trump Board maintained this position on misclassification in later cases. See intermodal bridge transport369 NLRB No. 37 (2020); Foster one in New Milford369 NLRB No. 109 (2020).
President Biden’s board is seeking a reversal Velox
During his presidential campaign, Biden boasted a liberal agenda and vowed to be the most pro-union president on record.
After winning the general election, President Biden quickly ousted the NLRB’s General Counsel, replacing him with Jennifer Abruzzo and filling the board with a majority of pro-union members.
Shortly after her appointment, on August 12, 2021, General Counsel Abruzzo issued Memorandum GC 21-04, which outlined the types of cases she was required to send through her office for review and re-examination, including cases with “employee status” such as that of the Trump Board Velox series of cases.
In a clear move to pursue instances of misclassification, Abruzzo then issued Memorandum GC 22-03 on February 10, 2022, agreeing to work alongside other federal agencies with the U.S. Department of Labor’s Wage and Hour Division to create “better to create paths for joint investigations, [and] co-enforcing” behaviors “that undermine[s] Workers’ rights” including “misclassification of workers” and similar acts “which may adversely affect organizing or negotiating efforts”.
The NLRB’s XPO logistics case provides a way for Velox reversal
It seems President Biden’s board has a chance to grant his wish for a reversal Velox: The Teamsters union in California reportedly filed an unfair labor practices indictment with the NLRB on January 19, 2022, arguing that the company XPO Logistics broke the law by falsely classifying drivers as independent contractors. Drivers have also demanded recognition, alternatively seeking union election – a right not afforded to (properly classified) independent contractors.
Watch out for possible misclassifications
If the opportunity arises, the board of directors is expected to agree with the union, and vice versa Volexand back to the Obama-era position, which states that the mere act of misclassifying an employee as an independent contractor constitutes a violation of the law in its own right.
Given the percentage increase in independent contractors as a percentage of the total workforce, a verdict in favor of the Teamsters will throw the spotlight on the issue and could open a barrage of ULPs, union ballot motions and other demands from a variety of groups of workers across the country currently classified as independent contractors are.
Companies that hire independent contractors should work closely with attorneys to review the grading of their employees and independent contractors to ensure their workers are properly classified.
If you have questions about this update and how it might affect your business, contact Jon Anderson, Adam Doerr, or your Husch Blackwell attorney. Subscribe to Husch Blackwell’s Labor Relations Law Insider Blog for the latest updates on traditional labor law matters.