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Misclassifying workers as independent contractors doesn’t violate the NLRA

Don’t forget the DOL or IRS

Posted September 9, 2019

In an employer-friendly determination on August 29, the National Labor Relations Board (NLRB) held that employers do not violate the National Labor Relations Act (NLRA) solely by misclassifying employees as independent contractors. The NLRB majority held that an employer’s communication to its workers of its opinion that they are independent contractors does not, by itself, violate the NLRA if that opinion turns out to be mistaken. According to the decision, such communication does not inherently threaten those employees with termination or other adverse action if they engage in activities protected by the NLRA, nor does it communicate that it would be futile for them to engage in such activities.

The case involved is Velox Express, Inc., 15-CA-184006, 368 NLRB No. 61. The employer, a courier company, classified some of its drivers as independent contractors. One employee felt she was an employee and not an independent contractor, in part because drivers did not have discretion to determine when and how long they work or to set their routes and the customers they service or had little opportunity for economic gain or loss. She indicated that, by misclassifying employees as independent contractors, an employer, regardless of its motive or intent, inherently interferes with, restrains, and coerces those employees in the exercise of their NLRA rights because the employer effectively conveys that the misclassified employees do not have any rights or protections under the NLRA when, in fact, they do.

In the case, the NLRB majority held that the employer’s misclassification of its employees as independent contractors was not a separate, stand-alone violation.

The issue of whether an individual is an employee or an independent contractor has been evolving, and the NLRB is only one agency that has input on the matter. The U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) also have their definitions of the terms, so employers must consider a variety of independent-contractor standards under different federal, state, and local laws and regulations. With this latest decision from the NLRB, employers can at least cross the NLRA issue of independent contractors off their worry list. Employers would still need to be able to show that an individual is an independent contractor. This can be done by applying the common-law agency test.

Common law test of factors to be considered include:

  • The extent of control which, by the agreement, the master may exercise over the details of the work.
  • Whether or not the one employed is engaged in a distinct occupation or business.
  • The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision.
  • The skill required in the particular occupation.
  • Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
  • The length of time for which the person is employed.
  • The method of payment, whether by the time or by the job.
  • Whether or not the work is part of the regular business of the employer.
  • Whether or not the parties believe they are creating the relation of master and servant.
  • Whether the principal is in business or not.

This article was written by Darlene M. Clabault, SHRM-CP, PHR, CLMS, of J. J. Keller & Associates, Inc.

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