From JDSupra, Richard J. Reibstein provides an excellent analysis and discussion of the recent NLRB Advice Memorandum that discussed independent contractor misclassification and unfair labor practices. Richard writes:
On August 26, 2016, the National Labor Relations Board made public an Advice Memorandum from the NLRB’s Office of General Counsel regarding an unfair labor practice case arising in the context of independent contractor misclassification. The Advice Memo has already been reported in the trade as ruling that the misclassification of employees as independent contractors, in and of itself, violates the National Labor Relations Act. A close reading of the Advice Memo, however, reveals that it never quite reaches that conclusion – but nonetheless seems to have extended the law to create a “misclassification-plus” type of unfair labor practice. Pacific 9 Transportation, Inc., Case 21-CA-150875 (Div. of Advice Memo, Dec. 18, 2015, released to public August 26, 2016).
What Does the NLRB Advice Memo Actually Say?
The Advice Memo instructs the Region where the charge was filed to issue a Section 8(a)(1) complaint “in these circumstances, where the Employertold its driversthat they were independent contractors and had no right to form a union but treated them as employees in virtually every respect.”
In the Advice Memo, the NLRB’s Office of General Counsel acknowledges that “[a]lthough the Board has never held that an employer’s misclassification of statutory employees as independent contractors in itself violates Section 8(a)(1), there are several lines of Board decisions that support such a finding.” Yet, when those lines of NLRB decisions are examined, they too depend on acts beyond simply classifying an employee as exempt or not under the NLRA. The first line of Board decisions focuses on actions that prevent employees from engaging in protected conduct, while the second line of cases highlights statements that engaging in union organizing would be futile because the company “would never accept an employer-employee relationship with its workers [that were classified as ICs].” In contrast, merely classifying workers as ICs does not prevent workers from engaging in union organizing nor suggest futility to employees where the company does nothing more than maintain its legal position that the workers in question are ICs and not employees. The third line of cases involves “misstatements of law . . . if the statement reasonably insinuates adverse consequences for engaging in [union] activity.” Again, merely classifying workers as ICs does not suggest adverse consequences for those who may seek to unionize, even though, as a matter of law, ICs have virtually no protection from termination under the NLRA.
The Advice Memo then examined the allegations in the Pac 9 case, focusing on the following: (1) the company entered into IC agreements providing the drivers with a fair degree of independence but did not abide by those terms, instead directing the manner of performance of the drivers; (2) the company sent drivers a memo that “only ‘employees (not owner operators or independent contractors) have the right to form a union’”; and (3) insisting that drivers are independent contractors, after the Region determined that they were not, “is tantamount to the Employer telling its employees that they engage in Section 7 [union] activities at the risk of losing their jobs.” The Advice Memo concludes: “For these reasons, we conclude that on these facts, the Employer’s misclassification of its employees as independent contractors acts to interfere and restrain its employees in the exercise of their Section 7 rights.”