NLRB Advice Memo: Independent Contractor Mistake is an NLRA Violation

Sep 26 2016 - Independent Contractor - Gail Cecchettini Whaley

State and federal enforcement agencies continue to crack down on the misclassification of independent contractors.

Drivers misclassified as independent contractors

National Labor Relations Board targets employer that classified drivers as independent contractors.

Recently, the National Labor Relations Board’s (NLRB) Office of General Counsel released an Advice Memorandum, which concluded that an employer’s misclassification of employees as independent contractors “interfered with and restrained” employees Section 7 rights. This is a new and expanding theory which involves the NLRB in classification decisions. The memo was prepared in December 2015, but not released until the end of August 2016.

Under Section 7 of the National Labor Relations Act (NLRA), employees in both union and nonunion workplaces have the right to engage in concerted activities, including discussing working conditions, pay or other work-related issues.

The case involved a drayage company servicing Los Angeles and Long Beach ports. The employer uses a fleet of trucks and drivers to transport containers to and from ports, rail locations and customer warehouses. The drivers sign an agreement that they are independent contractors.

A union began a campaign to organize the drivers. As part of the campaign, the union began filing wage-and-hour claims on the drivers’ behalf with the California Labor Commissioner, claiming that the drivers were misclassified.

The union also filed an unfair labor practice charge with the NLRB, alleging that the employer threatened drivers that it would close its facilities if they supported the union. In response, the company argued that the drivers were not employees and the NLRB had no jurisdiction.

The NLRB first determined that the drivers were employees and then found that the employer’s conduct violated the NLRA.

The Office of the General Counsel concluded that when the employer told the drivers that they were independent contractors and had no right to form a union but treated them as employees in “virtually every respect,” the employer’s misclassification of its drivers as independent contractors interfered with and restrained the drivers in their exercise of Section 7 rights.

As a remedy, the General Counsel instructed the regional NLRB office to seek an order requiring the employer to cease and desist from telling the drivers that they are independent contractors and to rescind any agreements classifying them as independent contractors.

The General Counsel’s theory is likely to be tested in the courts. In the meantime, keep in mind that misclassification mistakes in California continue to be costly for employers.

Gail Cecchettini Whaley, CalChamber Employment Law Counsel/Content

CalChamber members can take the Independent Contractor Quiz on HRCalifornia for a refresher and visit the Independent Contractors section for detailed information. Not a member? See how CalChamber can help you.

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