Deciding whether to classify workers as employees or independent contractors is an ongoing issue for companies. Misclassifying employees as independent contractors can draw the ire of federal and state agencies – including the Internal Revenue Service, the Department of Labor, and state workers’ compensation agencies – and can subject employers to back taxes, penalties, lawsuits under the Fair Labor Standards Act, and more. And, now, misclassifying employees could also be considered a violation of the National Labor Relations Act (“NLRA”).
On February 15, the National Labor Relations Board (“NLRB”) issued a notice inviting the public to file briefs in a pending case to address whether an employer’s act of misclassifying employees as independent contractors should be a per se violation of Section 8(a)(1) of the NLRA. Among other things, Section 8(a)(1) of the NLRA makes it an unfair labor practice for an employer to interfere with employees’ rights to form a union. Independent contractors are not guaranteed the same rights to unionize under the NLRA. Thus, a number of administrative law judges have already held that misclassifying employees as independent contractors violates the NLRA because it may prevent workers from engaging in concerted activity, including unionizing.
With the invitation for public input, the NLRB is clearly concerned with the issue of misclassification and is poised to rule on it, possibly later this year. But regardless of whether the NLRB holds that misclassifying employees is a per se labor law violation, employers should always use caution when classifying workers as independent contractors. With the IRS, DOL, and individual workers to contend with, misclassifying workers can already be a troublesome and costly mistake.
We will continue to monitor this situation and will provide updates as available. In the meantime, if you are an employer and have questions or concerns about how this issue can affect you and your workers, please contact your attorney, or a member of the Kean Miller Labor and Employment Team.