NLRB holds that simply misclassifying workers doesn’t violate NLRA

The National Labor Relations Board (NLRB) recently issued a decision in employers’ favor by holding that misclassification of an employee as an independent contractor, by itself, does not violate the National Labor Relations Act (NLRA).

In Velox Express Inc. and Jeannie Edge, the company Velox provided medical courier services and hired drivers as independent contractors. Velox fired a driver, Jeannie Edge, shortly after she raised group complaints regarding their classification. An Administrative Law Judge (ALJ) found that such misclassification violated the NLRA, because independent contractors are inherently threatened when asserting rights traditionally held by employees. The ALJ further reasoned that classification as an independent contractor conveyed a message that the worker cannot assert rights under the NLRA.

On review, the NLRB held that the company violated the NLRA when it discharged Edge in response to her complaints of misclassification. However, it also determined that misclassification alone is not sufficient to establish an NLRA violation.

The NLRB reasoned that independent contractors can act collectively. However, a company runs into trouble when it reacts to such collective action with threats of adverse consequences or promises of benefits. The NLRB further found that independent contractor determinations are difficult, and a standalone misclassification violation would have a chilling effect on the creation of independent contractor relationships.

While employers should be relieved to know that a potential misclassification will not by itself lead to an NLRA violation, employers should still exercise caution and consult legal counsel when making such classifications.  The reason for this is that, if the employer misclassifies an employee, it may have significant liability under other employment laws and regulations.