NLRB Memo Lays Out Misclassification Theory

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By Lawrence E. Dubé

Aug. 29 — The National Labor Relations Board’s general counsel released a legal memorandum explaining his theory that an employer committed an unfair labor practice by misclassifying employee drivers as independent contractors ( Pac. 9 Transp., Inc. , NLRB Div. of Advice, No. 21-CA-150875, 12/18/15 [released 8/26/16]).

The unfair labor practice theory involving worker misclassification hasn’t previously been tested before the NLRB or the courts, but the memorandum shows that’s the approach the general counsel will likely follow in other independent contractor disputes.

In the memorandum released Aug. 26, the NLRB’s Division of Advice wrote that by misinforming drivers they were independent contractors, Pacific 9 Transportation Inc. interfered with the drivers’ rights under the National Labor Relations Act to organize or engage in concerted activity for their mutual aid or protection.

The memorandum said the appropriate remedy was to require the employer to stop informing the drivers they were independent contractors and to rescind any agreements that purported to deny them employee status.

Dispute Over Classification of Port Drivers

The employer was engaged in a long-running dispute with the International Brotherhood of Teamsters concerning the alleged misclassification of port drivers who transport cargo containers in California.

The union filed an unfair labor practice charge alleging that the company had illegally threatened and questioned drivers about union activity.

An NLRB regional office concluded the drivers were employees protected by the NLRA and that the company’s actions interfered with their rights in violation of Section 8(a)(1) of the act.

Pac 9 settled that charge but then distributed a memorandum to drivers telling them Pac 9 had no employee drivers and the NLRB settlement did not apply to independent contractors.

The union filed a new unfair labor practice charge, and the issue of the company’s allegedly continuing to misclassify the drivers was referred to the Division of Advice. The charge was eventually closed in April without a trial or formal board proceeding.

Legal Issue Was Misclassification Under NLRA

The Division of Advice wrote the evidence “overwhelmingly” demonstrated that the Pac 9 drivers were employees rather than independent contractors.

The memorandum said “the Board has never held that an employer’s misclassification of statutory employees as independent contractors in itself violates section 8(a)(1),” but the NLRB unit found “there are several lines of Board decisions that support such a finding.”

Citing Parexel International, LLC, 356 N.L.R.B. No. 82, 190 LRRM 1034 (2011), the memorandum said attempting to prevent an employee from engaging in NLRA-protected conduct is unlawful because of the “chilling effect” on the future exercise of statutory rights.

General Counsel Found Unfair Labor Practice

In the case of Pac 9’s statements to drivers, the memorandum found “treating the drivers as employees on a daily basis while continuing to insist that they are independent contractors ... is without any legitimate business purpose other than to deny the drivers protections that inure to them as statutory employees, and [it] operates to chill its drivers’ exercise of their Section 7 rights.”

“[T]he Employer’s continued insistence to its employees during a union organizing campaign that they are independent contractors is tantamount to the employer telling its employees that they engage in Section 7 activity at the risk of losing their jobs,” the memorandum concluded.

The memorandum advised the regional office that the appropriate remedy for the misclassification unfair labor practice would be a cease-and-desist order to prevent further violations of employee rights, as well as a requirement that the employer “take affirmative action to rescind any portions of its agreements with its drivers that purport to classify them as independent contractors.”

The NLRB advice memorandum was issued on Dec. 18, 2015, but not released by the agency until after the unfair labor practice case was closed.

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

For More Information

Text of the advice memorandum is available at http://src.bna.com/h60.

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