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So You Told Your Employees They’re Contractors. Was That Wrong?

May 2, 2018, 8:53 AM

• National Labor Relations Board to decide if misclassification violates federal labor law • Former general counsel endorsed novel legal theory • GOP-majority board gets first chance to rule on the issue

Does an employer violate federal labor law if it misclassifies employees as independent contractors? The National Labor Relations Board is expected to decide that issue for the first time in the next few months.

The question has far-reaching implications. In today’s gig economy, independent contractors make up about 13 percent of the U.S. labor force, according to onebriefsubmitted by transportation organizations in response to an NLRB call for public input on the question.

Former NLRB General Counsel Richard F. Griffin advanced the theory that employers violate the National Labor Relations Act if they misinform workers that they’re independent contractors rather than full-fledged employees. Employees are afforded greater legal rights in the workplace than contractors, including rights to organize and bargain collectively over pay and other benefits.

But the current general counsel, Peter B. Robb (R), canceled Griffin’s initiative on misclassification shortly after he was sworn in late 2017, and a newly installed Republican board majority will ultimately decide whether the controversial theory survives.

Business groups may anticipate that the new leadership at the NLRB won’t sign off on Griffin’s theory. The board has already reversed a number of key decisions put in place by the Obama-era board that were viewed as pro-worker and pro-union.

The Chamber of Commerce, the HR Policy Association, and other business organizations filed briefs stating strong opposition to the idea that misclassification of a worker constitutes an unfair labor practice under the NLRA. Worker advocates, meanwhile, petitioned the board, backing Griffin’s argument.

The issue is “critical” for another reason, according to Julie Gutman Dickinson, a labor attorney and partner at Bush Gottlieb in California. “Misclassification is pervasive in the modern day workforce,” Dickinson told Bloomberg Law. She submitted abriefto the NLRB supporting Griffin’s position.

“I would hope the board looks seriously at the context of pervasive misclassification in this country and makes a determination that it’s severe enough and that they won’t allow employee rights to be chilled—and in fact concealed—and find it to be a violation of the act,” she said.

Attorneys for some of the business groups couldn’t be reached for comment. The Chamber of Commerce didn’t respond in time for publication.

Velox Case to Test Former General Counsel’s Legal Theory

The worker classification issue is presented in a former driver’s unfair labor practice case against a medical courier service. An administrative law judge found that Velox Express Inc. illegally fired Jeannie Edge and violated the NLRA by misclassifying its drivers as independent contractors.

Edge submitted her own statement in response to the board’s request for input and is represented by Dickinson.

The NLRA gives employees the right to join or support labor unions or to join together in concerted activity, and it forbids employers from interfering with, restraining, or coercing employees in the exercise of those rights. Independent contractors are excluded from such protections.

Griffin during his tenure often argued that misclassification was an unfair labor practice because it prevented workers from enjoying the labor law protections extended to employees under the NLRA.

Misclassification also could be used to intimidate workers via the assertion—wrong, but convincing—that an employer would treat them as legally unprotected independent contractors, the general counsel said.

Griffin’s legal theory has been endorsed by several administrative law judges, but it hasn’t progressed much beyond that since 2015.

Administrative Law Judge Arthur Amchan in September 2017acceptedGriffin’s argument inVelox, saying the logistics company’s misinforming drivers that they were contractors sent the message they had no right to join or support unions, or to act together with other employees to push their rights. Such a message interferes with the employees’ NLRA rights, Amchan said.

Stakeholders, and Complainant, Weigh In

Now the case is before the NLRB.

The firstbrieffiled to the labor board came from Morgan Lewis & Bockius LLP attorneys Harry I. Johnson and Julia S. Sturniolo on behalf of the Coalition for a Democratic Workplace and the U.S. Chamber of Commerce. Johnson is a former Republican member of the NLRB.

A two-step process is required to prove an employer unlawfully interfered with the right of employees to engage in NLRA-protected activity, they argued. Individual workers must be employees covered by the act, and the employer must take some coercive action that chills or interferes with employees’ exercise of their statutory rights.

The standard put forward by Griffinessentially seeks to eliminate the requirement of any coercive act or conduct, collapsing the established test into a single question of whether the respondent properly classified independent contractors,” Johnson and Sturniolo said.

But Dickinson told Bloomberg Law that’s simply a reflection of economic realities, given the proliferation of gig work, and is “consistent with the NLRA and other case law.”

“What interferes and coerces workers in the exercise of their rights more than being told, effectively, ‘you don’t have those rights,’?” she said. “There can be no more chilling effect on the right to organize and work collectively.”

Her client, and the complainant in the case, echoed the sentiment and said it’s reflected in her experience.

“I am approaching it from a unique perspective they don’t have ... as a misclassified worker who saw how the classification alone affected my coworkers and me,” she wrote.

When a business misinforms workers that they’re independent contractors, “they are being told they have no rights or protections under the Act, by the very definition of an IC,” Edge said. “What better way to keep them in line and ‘under control’ if they have already been told they have no rights?”

The complainant said her former co-workers still contact her about the status of her complaint and fear reprisal for speaking up because they’re still misclassified.

Businesses Say It’s Congress’ Call

Litigating worker classification before the NLRB isn’t the way to go, according to several transportation associations represented by A. Jack Finklea and Prasad Sharma of Scopelitis Garvin Light Hanson & Feary P.C. Arguing the issue on a case-by-case basis would create “a substantively chilling effect” on the use of independent contractors in the delivery of goods, they said in theirbriefto the labor board.

Only Congress has the authority to make misclassification unlawful under the NLRA, they said. The brief was filed for the Customized Logistics and Delivery Association, National Home Delivery Association, and Truck Renting and Leasing Association.

But Dickinson said whispers about bad economic effects are just “hyperbole.” Employers must deal with risk each time they fire a worker because of anti-discrimination laws, or classify someone as exempt from overtime, because of wage laws, she said.

“Every business decision potentially carries legal risk, and needs to be made carefully,” She said. “That risk shouldn’t be placed on the backs of workers.”

The Washington Legal Foundation, which describes itself as public-interest law firm and policy center litigating, educating, and advocating for free-market principles, alsoopposedthe recognition of worker misclassification as an unfair labor practice.

WLF attorneys Cory L. Andrews and Marc B. Robertson said sanctioning an employer for articulating a position that workers are independent contractors would clash with the NLRA’s free speech provision. The statute says that an employer’s expression of “any views, argument or opinion” may not by considered evidence of a statutory violation as long as the speech doesn’t include a threat or promise of benefit.

“There is nothing even remotely ‘coercive’ about mistakenly identifying a worker as an independent contractor,” WLF said.

Velox and Edge have until May 14 to respond to the amicus briefs.

The case isVelox Express, Inc., NLRB, Case 15-CA-184006, amicus briefs 4/30/18.