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Misclassifying Employees as Independent Contractors Does Not by Itself Violate Federal Labor Law

By Dan Combs

Although misclassifying employees as independent contractors exposes companies to damages, steep penalties, and other liability, misclassification alone is not an Unfair Labor Practice under the National Labor Relations Act (“NLRA”), the National Labor Relations Board (“NLRB”) has held.FN1

In Velox Express, Inc., the NLRB rejected the argument that the mere act of misclassifying employees as independent contractors inherently interfered with employees’ rights to engage in concerted activities to improve the terms and conditions of employment.FN2 Motive and intent are key—a misclassification is unlawful only if done for the propose of prohibiting employees from engaging in concerted protected activity or interfering with union activities. The common-sense decision recognizes that an employer’s classification of workers is a protected legal opinion and that it is often “far from self-evident” whether workers are legally independent contractors or workers.

Practical Takeaway

            Companies that use contractors must navigate a wide range of federal, state, and local laws and regulations about independent contractors, which each apply different legal standards. The NLRB’s decision eliminates an unnecessary further claim for such companies.

Footnotes:

FN1:    Velox Express, Inc. and Jeannie Edge, 368 NLRB NO. 61, slip op. (2019).

FN2:     The NLRB found that the workers at issue (drivers who collected medial specimens from customers and transported them to the company’s office) were employees under the independent contractor test set forth in SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019). Velox Express, 368 NLRB No. 61, slip op. at 4 (2019).