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May 11, 2016

Misclassification Of Workers As "Independent Contractors" May Violate The National Labor Relations Act

On April 18, 2016, the Regional Director for the National Labor Relations Board in Los Angeles issued a complaint against trucking company Intermodal Bridge Transport (“Intermodal”), alleging that the company’s misclassification of its truck drivers as “independent contractors” is a violation of the National Labor Relations Act (“NLRA”). The complaint suggests that such misclassification – by itself – violates the NLRA by “inhibiting [the drivers] from engaging in Section 7 activity and depriving them of the protections of the [NLRA].”

The complaint is undoubtedly a response to a memorandum issued in March 2016 by the NLRB’s General Counsel to all Regional Directors which identified “General Counsel initiatives and/or priority areas of the law and labor policy.” Cases which involve “the question of whether the misclassification of employees as independent contractors violates Section 8(a)(1)” are among the types of cases identified in the memorandum as being of interest to the General Counsel.

Section 7 of the NLRA guarantees employees (not independent contractors) the right to organize and to engage in other “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Employees engage in protected “concerted activity” under the NLRA when two or more employees take action for their mutual aid or protection regarding terms and conditions of employment, irrespective of whether the workplace is union or non-union. Section 8(a)(1) of the NLRA makes it unlawful for an employer to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.

The General Counsel’s March 2016 memorandum follows the NLRB’s decision in FedEx Home Delivery, 361 NLRB No. 55 (Sep. 30, 2014), where the NLRB, applying an expansive definition of “employee,” held that drivers for FedEx were covered employees under the NLRA and not independent contractors. The NLRB in FedEx rejected a more narrow test for whether a worker is an “employee” articulated by the U.S. Court of Appeals for the District of Columbia, and held that whether the evidences tends to show that the individual is, in fact, rendering services as an independent business is relevant to the determination. The NLRB’s holding that the FedEx drivers were employees meant that the drivers could unionize.

A hearing in the Intermodal case is scheduled to take place on June 13, 2016 in Los Angeles before a NLRB administrative law judge. It remains to be seen whether the NLRB will deem employee misclassification – standing alone – to constitute a violation of the NLRA. However, given the pro-labor agenda of the current NLRB, it would not be surprising if the NLRB takes such a position. Unions will likely rely on these developments to recruit. Companies that retain independent contractors should consider that they may be at risk for unionization efforts, particularly if there is a possibility that the independent contractors are misclassified.

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