NLRB Rules Misclassification of Independent Contractors Does Not Violate the NLRA

By Christopher J. Saugstad - Lindner & Marsack, S.C.

September 6, 2019

On August 29, 2019, the National Labor Relations Board (the “Board”) determined that employers do not violate the National Labor Relations Act (the “NLRA”) merely by misclassifying employees as independent contractors when they should have been classified as employees.

In Velox Express, Inc., 15-CA-184006, 368 NLRB No. 61 (2019), the Board reversed a prior Obama-era decision which ruled Velox had unlawfully interfered with its workers’ rights under the NLRA. Velox Express, Inc. (“Velox”) is a medical courier service in which a number of its drivers were classified by Velox as independent contractors. The Charging Party in Velox raised group complaints of the independent contractor classification and was subsequently discharged.

Initially, an Administrative Law Judge ruled Velox had interfered with workers’ rights by Velox’s misclassification of the Charging Party. Upon review, the Board requested briefing and received thirteen briefs from twenty-eight interested parties. The Board, utilizing their recent decision in SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019), determined the workers were actually employees and therefore protected by the NLRA. The Board held Velox had violated the NLRA when it discharged the Charging Party for bringing to management’s attention group complaints regarding its treatment of employees.

Notably, however, the Board reversed the judge’s decision that the misclassification of independent contractors violated the NLRA as a separate and distinct violation. The Board reasoned “erroneously communicating to workers that they are independent contractors does not, in and of itself, contain any ‘threat of reprisal or force or promise of benefit.’” The Board held this type of misclassification would not inherently threaten employees’ adverse actions like discharge if they were to engage in protected activities under the NLRA; nor would the communication of classification solely show it was futile for the workers to engage in such protected activities. The Board explained, “[i]n and of itself, an employer’s communication of its position that its workers are independent contractors simply does not carry either implication.”

Additionally, the Board held that finding that a misclassification created a violation of the NLRA would deter employers from creating independent contractor relationships and would improperly shift the burden of proof to employers.

The Board’s recent ruling in Velox means the Board has removed itself from any future decisions based solely on worker misclassification. Unlike employees, who enjoy protected rights under the NLRA including unionization, independent contractors are not covered by the NLRA and are therefore not protected by it either. While this decision is viewed as a victory for employer, the importance of properly classifying and paying employees remains critical to avoid possible violations of the Fair Labor Standards Act (the “FLSA”).

Lindner & Marsack has represented employers in their dealings with unions for over a century. If you have any questions about this case or any other aspect of classic labor-management law, please feel free to contact us at any time.