In a much anticipated decision, the National Labor Relations Board (the “Board”) recently ruled in Velo Express, Inc. and Jeannie Edge that misclassifying employees as independent contractors does not violate the National Labor Relations Act (the “Act”).
The Board found that the act of misclassification alone does not constitute unlawful interference, restraint, or coercion of an employee’s self-organization and bargaining rights. In so finding, the Board noted that there is nothing actually coercive or threatening about a company’s classification decision. Simply alerting individuals that they are independent contractors and not employees “does not prohibit the workers from engaging in [protected] activity” under the Act, nor does it “threaten them with adverse consequences for doing so, or promise them benefits if they refrain from doing so.”
The Board carefully noted that while misclassification can be used to interfere with Act-provided employee rights, misclassification alone cannot support such a theory. According to the Board, a company must take additional actions beyond incorrectly designating its workforce as independent contractors before they can be said to have interfered with, restrained, or coerced employees in the exercise of their self-organizing and bargaining rights protected by the Act. Here, for instance, the Board found that the company violated the Act when it terminated its relationship with the independent contractor in response to her complaints about being misclassified.
The Board’s decision is welcome news for companies utilizing independent contractors, and yet another example of the Republican-majority Board finding in favor of employers. With this decision, companies can be more confident that liability under the Act will not flow from the misclassification of its workforce alone. However, employers can of course still be liable under the Act if they take actions in conjunction with such misclassification that interfere with workers’ rights to bargain and self-organize. On a broader level, companies utilizing independent contractors should take a close look at their workforce relationships and determine whether independent contractors are properly classified in accordance with Board law, other federal law, and state law. Baker McKenzie’s Employment team regularly advises on minimizing the risks associated with misclassification and related issues.