In Velox Express Inc., National Labor Relations Board, the National Labor Relations Board (Board) is considering under what circumstances, if any, should the Board deem an employer’s act of misclassifying employees as independent contractors a violation of Section 8(a)(1) of the National Labor Relations Act (Act). On February 15, 2018, the Board announced it was inviting the parties and others interested to submit a brief addressing their opinion on the issue. Briefs are due to the Board on or before April 16, 2018.
The Board is reviewing the case after an Administrative Law Judge found that Velox had violated the Act by misclassifying its drivers as independent contractors rather than employees. By misclassifying the drivers, the ALJ held that Velox had effectively told the drivers they were not entitled to the protections for concerted activity offered under Section 7 of the Act.
What rights does Section 7 offer, that Velox allegedly denied to its drivers? Generally, Section 7 gives employees the right to self-organize, form, join, or assist unions, collectively bargain for changes in terms and conditions of employment, and engage or refrain from protected concerted activities. Under Section 8 of the Act, it is a violation for an employer to take adverse action or threaten to take adverse action against an employee for invoking their rights under Section 7. The Administrative Judge found that by misclassifying the drivers as independent contractors, Velox had effectively told the drivers they were not entitled to the protections under Section 7, since the Act only affords protection to employees.
Why does this matter? Well, not only will an employer be liable for FLSA damages associated with misclassification (double damages plus attorneys’ fees), it can also be found to have engaged in an unfair labor practice under Section 8 (typically resulting in a cease and desist order, reinstatement or back pay, and other affirmative actions such as notice posting). Thus, in reality, such decision would likely add a notice and cease and desist to the mix, as the wage (and benefit) piece would already be handled from the FLSA side.