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Misclassification of Workers as Independent Contractors Not a Violation of Federal Labor Law

On August 29, 2019, the National Labor Relations Board (“NLRB”) issued its decision in Velox Express, Inc., holding that an employer’s misclassification of its workers as independent contractors alone does not violate the National Labor Relations Act (“NLRA”). This is the most recent decision in a line of decisions by the current NLRB favoring employers.

 
Background
 

The Velox decision involves an employer misclassifying an employee as an independent contractor and subsequently terminating the employee for raising group complaints about the misclassification.
 
Velox Express Inc. (“Velox”)’s drivers collect medical specimens from medical facilities and transport them to a laboratory. Velox paid the drivers a flat rate for completing their routes and the drivers did not have the opportunity to decide their own routes or determine when or how long to work. Additionally, drivers did not need any special skills or education. The drivers owned their own vehicles and could use their vehicles to complete other paid work.
 
Velox determined that the drivers were independent contractors, informed the drivers that they were independent contractors, and ultimately terminated a driver when she raised group complaints about the drivers’ classification.
 
Legal Analysis

Section 2 of the NLRA excludes independent contractors from its coverage. Because independent contractors are excluded from the NLRA’s definition of “employee”, employers are not prohibited from interfering with, restraining, or coercing independent contractors from working collectively as a group for their mutual benefit or protection.
 
The NLRB examined the duties of the drivers to determine whether they should be classified as employees or independent contractors. After weighing factors such as the lack of opportunity for economic gain and the driver’s ownership of the vehicles, the NLRB determined that Velox’s drivers were employees, not independent contractors. 
 
The NLRB determined in Velox that an employer’s communication informing its workers that they are independent contractors does not violate the NLRA because the communication alone does not prohibit employees from engaging in Section 7 activity, threaten employees with adverse consequences if they participate in Section 7 activity, or promise benefits if employees refrain from participating in that activity. Accordingly, if an employer takes no adverse action against workers, a communication regarding their status as an employee or independent contractor is simply an expression of a view permitted by Section 8(c) of the NLRA.
 
Here, however, Velox took adverse action and terminated a driver after she raised group complaints about the drivers’ classification. Because the NLRB determined that the driver was an employee and not an independent contractor, her termination was a violation of the NLRA.

Takeaways for Employers

An employer’s good faith, erroneous misclassification of an employee as an independent contractor does not inherently constitute a violation of the NLRA. However, an NLRA violation occurs if an employer intentionally misclassifies a worker’s status to interfere with an employee’s Section 7 rights, or takes adverse action against an employee protected by Section 7 of the NLRA.