The NLRB Weighs in on Misclassification

If you’re in management, there’s some good news to report out of the National Labor Relations Board—at least theoretically.

The NLRB has just ruled that it’s not a violation of federal law–namely, the National Labor Relations Act—when employers misclassify their workers as independent contractors, as opposed to employees.

Classification issues have made headlines of late, especially in the wake of the California Supreme Court’s decision in Dynamex Operations West Inc. v. Superior Court, which significantly relaxed the standard applied in California to determine whether any given individual may be acting as an employee or independent contractor. But let’s put a pin in that for just a moment.

In the matter before the NLRB, Velox Express (a medical logistics company) was found to have misclassified certain workers as independent contractors. Despite this conclusion, the Board held that the misclassification didn’t violate the NLRA, which makes it illegal for employers to punish workers for forming unions or otherwise engaging in “concerted activities.” The NLRB determined that misclassification on the part of Velox didn’t serve to suppress workers’ organizing rights—this because the workers in question weren’t "inherently threatened" with firing or other discipline for acting together (and misclassification, by itself, wasn’t tantamount to such a threat).

The takeaway from the case is straightforward—employers that misclassify workers aren’t subject to NLRB litigation in the absence of some other labor law violation—though perhaps it’s something of a non-issue given the impact of certain state laws.

In California, for example, misclassification violates state law and related claims can still be brought by aggrieved workers (either individually or in a representative capacity) and the Division of Labor Standards Enforcement – the administrative agency charged with enforcement of the Labor Code. That being said, and given the ruling in Dynamex—by which an individual may be denied the status of employee only if the worker is the type of traditional independent contractor (such as an independent plumber or electrician) who would not reasonably have been viewed as working in the hiring business—there may well be an uptick rather than downturn of misclassification cases notwithstanding the NLRB’s take on the topic.

Long story short: (1) misclassification should remain front and center on company radar screens, and (2) the upside of the NLRB’s Velox Express ruling is likely reserved for entities with locations in states that largely track federal law.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for guidance in specific situations.