Caution: NLRB GC treats employee misclassification as an unfair labor practice

In an Advice Memorandum released on August 26, 2016, the NLRB General Counsel determined that a Regional Office should issue a complaint alleging that an employer violated the National Labor Relations Act by misclassifying its drivers as independent contractors. According to the General Counsel’s Division of Advice, Pac-9 Transportation told its drivers that they were independent contractors and had no right to form a union, requiring them to execute a "lease and transportation agreement," but according to the advice memo, treated them as employees in virtually every respect. This misclassification of its drivers as independent contractors interfered with and restrained the drivers in their exercise of Section 7 rights in violation of Section 8(a)(1) of the Act. 8(a)(1) violation. After spending the bulk of its discussion on why the drivers were statutory employees, the advice memo turned to the Sec. 8(a)(1) violation. "Although the Board has never held that an employer’s misclassification of statutory employees as independent contractors in itself violates Section 8(a)(1), there are several lines of Board decisions that support such a finding," it said.

1. First, the Board has held that an employer violates Section 8(a)(1) when its actions operate to chill or curtail future Section 7 activity of statutory employees.
2. Second, employer statements to employees that engaging in Section 7 activity would be futile violate Section 8(a)(1).
3. Third, the Board has also found misstatements of law to constitute an unlawful interference with employees’ Section 7 rights if the statement reasonably insinuates adverse consequences for engaging in Section 7 activity.

Here, misclassification of Pac-9’s statutory employees as independent contractors operated as a restraint on and interference with its drivers’ exercise of their Section 7 rights. The employer continued to insist in its communications with drivers that they were independent contractors, even after the Region determined that the drivers were statutory employees, which the Division of Advice suggested was "without any legitimate business purpose other than to deny the drivers the protections that inure to them as statutory employees, and operates to chill its drivers’ exercise of their Section 7 rights." Misclassification also suppresses future Section 7 activity by imparting to employees that they do not possess Section 7 rights in the first place. And, it works as a preemptive strike to chill employees from exercising their rights under the Act during a period of critical importance—the union’s organizing campaign, according to the Division of Advice. The Division of Advice also cited a memo from the employer conveying that "unionization would be futile." The memo stated that the employer "only contracts with owner operators and independent contractors[,]" that it "[d]oes not have any employee drivers[,]" and that only "employees (not owner operators or independent contractors) have the right to form a union[.]" This memo was issued after the employer had purportedly settled prior unlawful activity, and it demonstrated to employees that "resort to the Board’s processes are futile." Finally, in light of the employer’s awareness that the Region already determined that its drivers were statutory employees, the employer’s continued insistence to its drivers that they are independent contractors was "akin to a misstatement of law that reasonably insinuates adverse consequences for employees’ continued Section 7 activity," the memo concluded.