The general counsel for the National Labor Relations Board (NLRB) has set its sights on independent contractor misclassification under the National Labor Relations Act (NLRA). Significantly, the initial target for implementing this new enforcement strategy was a group of affiliated transportation, logistics and brokerage companies. The general counsel recently issued a complaint against these affiliated transportation companies, alleging that they were joint employers who violated the NLRA by improperly misclassifying drivers as independent contractors, rather than employee-drivers, and by engaging in other related violations.
Background
As readers may recall, a recent legal comment article addressed how, in December 2021, the NLRB sought public input on its analysis of independent contractor status under the NLRA. Many companies, including many of our readers, use independent contractors. Properly classified independent contractors are exempt from coverage of most relevant federal employment laws, including the NLRA and the separate Fair Labor Standards Act (FLSA), because such workers are not employees under the statutes. Therefore, independent contractors are not covered by the NLRA.
The Trump-era NLRB overruled the prior Obama-era standard for determining when a worker is an independent contractor and returned to a more balanced standard for businesses. This current standard takes into account various factors when evaluating whether a worker is an independent contractor, such as the amount of control a company exercises over a worker, level of skill needed for the job, and manner of payment. This standard makes it simpler for employers to classify workers as independent contractors under the NLRA. It is highly likely the Biden-era NLRB will seek to modify the current standard. In doing so, it will likely adopt a more difficult test for businesses to satisfy in classifying workers as independent contractors, such as the ABC test, for example. It follows that any such new standard probably will significantly increase the potential likelihood of employee status.
During the 2022 TCA Convention in Las Vegas last month, a session was conducted on this topic. The presentation discussed the Biden administration’s pro-labor push, including in the area of independent contractor misclassification, involving both the NLRB and the Department of Labor (DOL), which administers and enforces the FLSA. The Biden administration has a stated goal of being more union friendly, and more aggressive, resulting in a more radical overall approach. President Biden has previously proclaimed to organized labor that he “is going to be the strongest labor president you have ever had.”
The previously announced NLRB/DOL partnership to work together in a joint effort to address issues, including independent contractor misclassification, sends a clear message. This joint partnership program will continue to be implemented and realized as more and more related developments come out of the NLRB and the DOL. The issuance of this new complaint by the NLRB general counsel is a definite sign of the Biden administration’s commitment to follow this path. It also shows that the general counsel is not content on waiting for a new standard to be otherwise implemented under the NLRA.
General counsel’s complaint
The complaint was issued on the authority of the new NLRB general counsel, Jennifer Abruzzo, who was appointed by President Biden. The complaint alleges that the employer and its affiliates violated Section 8(a)(1) of the NLRA by misclassifying drivers as independent contractors. The complaint further alleges these entities also violated Sections 8(a)(1) and 8(a)(3) by engaging in other activities in violation of the workers’ NLRA Section 7 rights, such as interrogating a driver about his union activities and retaliating against drivers because they assisted the Teamsters Union in seeking to organize drivers.
The complaint seeks an affirmative order that the alleged joint employers must reclassify their independent contractor drivers as employees, and further seeks compensation for any harm the workers incurred, including being made whole for direct and foreseeable consequential harm, as a result of the misclassification as independent contractors, and other related violations.
It appears that the goal of this complaint is to have a previous NLRB decision overturned and replaced with a more liberal ruling. The previous NLRB decision held that a company’s act of misclassifying drivers as independent contractors is not, standing alone, a violation of the NLRA. In addition, the previous NLRB decision also refused to issue an order directing the employer to reclassify the drivers as employees, but this new complaint specifically seeks an order reclassifying the independent contractors and making them whole.
Notably, the complaint does not set forth any specific allegations about the factors pertaining to misclassification, which may be grounds for dismissal. The lack of any factual allegations, however, is evidence of the general counsel’s goal to create a standalone violation of the NLRA as a matter of law—apparently regardless of whether the company has a good faith belief that the workers are properly classified.
Takeaway
Ultimately, this new NLRB complaint is further evidence of the continuing ideological shift in the Biden-era Board and in other federal agencies. Once again, at least for now, in the words of Bob Dylan “The Times They Are a-Changin.” This complaint is only part of the early stages in an expected long line of aggressive actions that the Biden administration and its federal agencies, including the DOL and the NLRB, are pursuing and will continue to pursue. Employers should continue to monitor developments in this area as we are only witnessing the beginning of these various legal developments.
R. Eddie Wayland is a partner with the law firm of King & Ballow. You may reach Mr. Wayland at (615) 726-5430 or at rew@kingballow.com. The foregoing materials, discussion and comments have been abridged from laws, court decisions, and administrative rulings and should not be construed as legal advice on specific situations or subjects.