NLRB Decision on Independent Contractor Issue Could Impact Related FLSA Litigation

By Geoffrey M. Gilbert, Jr. - McMahon Berger, PC.

May 18, 2018

On May 2, 2018, Leslie Smith, a well-known mixed martial arts fighter, filed an unfair labor practice charge with the National Labor Relations Board (“NLRB”) alleging that the Ultimate Fighting Championship (“UFC’) failed to renew her contract because she was trying to organize other UFC fighters. While alleged retaliation for engaging in union activity is nothing new, her case raises an additional issue that employers should pay careful attention to: whether misclassification of a worker as an independent contractor is – standing alone – an unfair labor practice under the National Labor Relations Act (“NLRA”).

Because only “employees” (not independent contractors) are covered by the NLRA, the NLRB first will have to determine if UFC fighters are independent contractors or employees. Currently UFC classifies its fighters as independent contractors. Smith has argued that if UFC misclassified her as an independent contractor, that alone is a violation of the NLRA because it chills Section 7 activity. That very issue is currently before the NLRB in a separate case. The NLRB invited public comments on the question, and the public briefing deadline was April 30, 2018. If the NLRB determines that employee misclassification alone is an unfair labor practice, it likely will lead not only to the filing of more charges with the NLRB but, perhaps more significantly for many employers, it could impact wage and hour litigation against the alleged employer.

Under the Fair Labor Standards Act (“FLSA”) an employee is entitled to minimum wage and an overtime premium for any hours worked over 40 in a work week. Like the NLRA, the FLSA only applies to employees – not independent contractors. Thus, if a worker is misclassified as an independent contractor, the employee may be entitled to, among other things, minimum wage and/or additional wages for any hours worked over 40 in a work week. As most employers are aware, wage and hour litigation has increased dramatically in recent years, and such lawsuits often involve the question of whether the worker classified as an independent contractor is really an “employee” under the FLSA.

If the NLRB declares that misclassification alone is an unfair labor practice, it will open the door to employees (and their wage and hour attorneys) obtaining a determination on employment that may be used in a future wage and hour lawsuit. Like charges filed with the Equal Employment Opportunity Commission, employees can file unfair labor practice charges for free and their charges are investigated by NLRB staff. Unlike EEOC charges, however, the NLRB – rather than a federal court – will determine whether a violation of the NLRA has occurred. NLRB proceedings often are much less formal than judicial litigation and permit the employer to conduct much less discovery and motion practice. Coupled with the NLRB’s traditional hostility to employers generally, and independent contractor classification more specifically, the NLRB will provide a much friendlier forum for employees to litigate the question of whether they are “employees” as opposed to “independent contractors.”

If the NLRB determines that the mere misclassification of an employee as an independent contractor is, standing alone, a violation of the NLRA, employees may begin using the NLRB’s proceedings to secure a decision that they are “employees” and then use that finding to support a wage and hour lawsuit for FLSA violations. Although the question of whether a worker is an “employee” under the NLRA is technically different from whether they are “employees” under the FLSA, a finding by the NLRB – an agency with the U.S. Department of Labor – that an individual is an “employee” may have weight in a subsequent FLSA lawsuit over the same question.

McMahon Berger will continue to monitor the NLRB’s decisions in this area.  In the meantime, these developments are just one more reason employers would do well to make sure workers are correctly classified.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for over sixty years, and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.