By Russell A. Hollrah
The National Labor Relations Board (“NLRB”) appears to be creating a new source of regulatory risk to companies doing business with independent contractors. On April 18, 2016, the Regional Director of the NLRB’s Los Angeles office issued a Complaint against a transportation company alleging, among other things, that it is an unfair labor practice in violation of the National Labor Relations Act (“NLRA”) to misclassify an individual as an independent contractor.
By way of background, the International Brotherhood of Teamsters on August 10, 2015, filed with the NLRB’s Los Angeles regional office an unfair labor practice charge against that same transportation company, premised in part on an allegation that the company misclassified individuals as independent contractors. The regional office conducted an investigation and determined that the charge has merit. Subsequently, the Regional Director issued the aforementioned Complaint.
The Complaint alleges that because the transportation company misclassified individuals as independent contractors, it has “inhibit[ed] them from engaging in Section 7 activity and depriv[ed] them of the protections of the [NLRA].” A hearing before an NLRB administrative law judge is scheduled for June 13, 2016.
In the month prior to the Regional Director filing the Complaint in this matter, the NLRB’s General Counsel issued General Counsel Memorandum 16-01, regarding Mandatory Submissions to the Division of Advice, which identifies matters that involve General Counsel initiatives and/or priority areas. Two salient matters the memorandum identifies are (i) “Cases involving the employment status of workers in the on-demand economy,” and (ii) “Cases involving the question of whether the misclassification of employees as independent contractors violates Section 8(a)(1).” The memorandum directs Regional Directors to contact NLRB Headquarters for guidance and centralized consideration when investigating these matters.
The recent General Counsel Memorandum and Complaint suggest that the NLRB is making worker misclassification a higher priority. The Complaint might well portend the aggressiveness with which Regional Directors intend to pursue this priority. Firms that do business with independent contractors need to be aware of this new emerging regulatory threat.
The hearing scheduled for June 13 concerning the transportation company could provide important insight into the legal and factual arguments that will be used to support the contention that worker misclassification is an unfair labor practice, and as to whether this contention has merit.
If you have any questions or would like to discuss this development, please let us know.
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The foregoing is intended solely as general information and may not be considered tax or legal advice; nor can it be used or relied upon for the purpose of (i) avoiding penalties under any taxing statute or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. You should not take any action based upon any information contained herein without first consulting legal counsel familiar with your particular circumstances.
 The test generally used for determining whether an individual is an employee or independent contractor for purposes of the NLRA is the common-law, right-of-control test. See, e.g., Corporate Express Delivery Sys. v. NLRB, 292 F.3d 777 (D.C. Cir. 2002).
 Independent contractors are not covered by the NLRA. See, NLRA section 2(3).
 NLRA section 7 provides:
Sec. 7. [§ 157.] Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 8(a)(3) [section 158(a)(3) of this title].
 NLRA section 8(a)(1) provides:
(a) [Unfair labor practices by employer] It shall be an unfair labor practice for an employer—
(1) to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7 [section 157 of this title];