Recently, the National Labor Relations Board (NLRB) issued another pro-employer decision, resolving an issue at the forefront of employment law, independent contractor classification.  In Velox Express, Inc. and Jeannie Edge, the NLRB determined that misclassification of an employee as an independent contractor alone does not violate the National Labor Relations Act (NLRA).

Background

Velox provides medical courier services and engaged drivers as independent contractors. According to the NLRB opinion, drivers collected medical specimens from customers for delivery to a lab. Velox assigns routes containing specific stops to be made on specific days during specific time periods. The drivers have no proprietary interest in their routes, and they could not sell or transfer them, nor could they hire employees to service their routes. Velox pays drivers a flat rate, which it unilaterally sets. If a driver is given a new stop, Velox unilaterally increases the rate; conversely, if it removes a stop, Velox unilaterally decreases the rate.

Based on the overall record, the NLRB determined the drivers do not have any meaningful opportunity for economic gain through their own efforts and initiative. Instead, Velox shifted certain costs without providing the drivers independence to engage in entrepreneurial opportunities. The NLRB determined that Velox had, therefore, misclassified its drivers as independent contractors.

The question of first impression was whether that misclassification alone violated the NLRA.

Legal Analysis

Section 8(a)(1) of the NLRA provides that it is an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7” of the act. Section 7 guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The NLRB found that an employer’s communication to employees that they are independent contractors does not expressly invoke the act as it does not prohibit the workers from engaging in Section 7 activity by threatening them with adverse consequences or promising them benefits.

Instead, the NLRB found that an employer decision to classify its employees as independent contractors is a legal opinion, and communication of that legal opinion is privileged by Section 8(c) of the act, which states:

“The expressing of any views, argument, or opinion, or the dissemination thereof, whether in written, printed, graphic, or visual form, shall not constitute or be evidence of an unfair labor practice . . . , if such expression contains no threat of reprisal or force or promise of benefit.”

The privilege applies even if the communication is erroneous.

The NLRB additionally found that legal and policy concerns weighed against finding a stand-alone violation for misclassifying employees as independent contractors.  Independent-contractor determinations are difficult, especially given the numerous laws and regulations that apply different standards for determining independent-contractor status. A stand-alone misclassification violation would chill the creation of independent-contractor relationships, which the NLRB says would be contrary to the NLRA’s intent to preserve independent-contractor relationships. Any decision to classify employees as independent contractors could result in an unfair labor practice charge and the possibility of proacted litigation. To avoid that, employers would decide not to enter into or continue independent-contractor relationships, which is not in line with the NLRA’s purpose.

Takeaways for Employers

As we have said before, employers face potential liability under local, state, and/or federal regulations each time they classify an employee as an independent contractor. The NLRB has now made it clear that a good faith, erroneous misclassification of an employee as an independent contractor will not inherently constitute a NLRA violation. That said, employers should continue to consult legal counsel when making independent-contractor determinations. Classification of workers as independent contractors is still risky due to the multiplicity of often-changing legal standards and increased regulatory attention given to misclassification issues.