Workers considered “employees” are covered under the National Labor Relations Act (NLRA) and are afforded certain rights to improve their wages and working conditions. Employees have the right to unionize and the right to engage in concerted protected activity. Further, under the NLRA, an employer is not allowed to interfere with the protected concerted activities of its workers. Unlike employees, workers classified as independent contractors are specifically excluded from the NLRA’s coverage.
But what happens when an employer misclassifies workers as independent contractors? On August 29, 2019, the National Labor Relations Board (NLRB) decided Velox Express, Inc. and Jeannie Edge, 368 NLRB No. 61, and made their stance on the matter clear: Misclassifying a worker as an independent contractor is not a violation of the NLRA.
Dissecting the NLRB’s Ruling
The NLRB determined that the misclassification of employees as independent contractors alone is not unlawful given that the Board can later determine that the worker was misclassified. The Board also determined that nothing in a mere misclassification prevents workers from engaging in protected concerted activities.
What does this mean for employers?
Merely communicating a misclassification status to workers in and of itself does not contain any “threat of reprisal or force or promise of benefit” and thus will not be considered a violation of the NLRA.
The NLRB reasoned that when an employer decides to classify workers as independent contractors, the employer is forming a legal opinion regarding the status of those workers, which it can do under the NLRA. That employer’s opinion does not get less protection because it later turns out to be incorrect.
The NLRB’s decision takes into consideration that employers have to evaluate the factual circumstances and weigh the different factors together to make such classifications while also considering the applicable law. The Board notes the difficulty employers have in applying the law to reach a proper classification; the reality that different conclusions can be reached regarding a worker’s classification; and the possible chilling effect on the creation of independent-contractor relationships in the workplace.
Why Companies Should Proceed With Caution
Despite the latitude provided by Velox Express, the NLRB will find a violation of the NLRA if an employer misclassifies a worker to expressly prohibit employees from engaging in a protected activity or indicate that engaging in a union or other protected activity would be futile.
Activities that an employer should not engage in include:
- Interfering with union organizing campaigns and other union activity.
- Informing misclassified employees that they cannot participate in union activities.
- Responding to workers taking the position that they are employees with threats, promises and interrogations.
If these types of instances arise, the NLRB will find that the employer violated the NLRA. Employers should note, however, that the determination as to whether a misclassification would reasonably tend to interfere with employees’ exercise of their protected rights is still made from the perspective of employees.
Finally, it is important to remember that misclassifying an employee as an independent contractor can lead to liability under a host of other federal and state laws. As a result, employers are encouraged to consult with counsel prior to classifying a worker as an independent contractor rather than an employee.