NLRB signals to employers in the gig economy

Properly classifying employees, or restructuring the job so workers are truly independent contractors, just took on greater importance with a recent NLRB signpost.

The independent federal agency, which is authorized to sue private sector employers for unfair labor practices, released a memo signaling its approach toward employers who misclassify employees as independent contractors. The Board held that by treating workers as employees in virtually every respect while continuing to insist that they are independent contractors, the employer committed unfair labor practice. The Board was persuaded that the employer actually maintained extensive control over the workers’ day-to-day operations, notwithstanding a form agreement stating that workers are independent contractors.

Although this theory currently remains untested in the courts, it is consistent with NLRB precedent and, under the Board’s Non-Acquiescence Policy, likely to be applied until taken up by the Supreme Court.

The NLRB is the latest agency to scrutinize the practice by employers of shoehorning workers into the independent contractor classification, viewed as harmful to workers, law-abiding employers, and the overall competitiveness of the U.S. economy. The Department of Labor issued its memorandum indicating that this practice would be a priority for its enforcement efforts back in July 2015.

For background information on the NLRB, along with summaries of some recent issues it has addressed, see this slideshow, prepared for a legal education seminar by our attorney Dipak Patel.