Can intentional misclassification of employees as independent contractors violate the National Labor Relations Act? Attorneys general from 12 states say yes.

The group filed a friend of the court brief on April 30 with the National Labor Relations Board, which will decide whether to uphold the decision of an administrative law judge in the case of Velox Express Inc. vs. Jeannie Edge. The judge in the case found that intentional misclassification of workers as independent contractors did violate the act.

“Employers that misclassify their employees cheat local and state governments from collecting millions in taxes each year and create an unfair playing field for others,” Massachusetts Attorney General Maura Healey said in a statement. “I urge the National Labor Relations Board to uphold the decision in this case.”

Massachusetts alone loses an estimated $259 million to $278 million because of misclassification, according to the Attorney General’s office.

“More and more employers are misclassifying their workers as ‘independent contractors’ because they think it’s cheaper than doing things the right way,” New Jersey Attorney General Gurbir Grewal said in a statement. “But this practice isn’t just illegal. It actually makes New Jersey’s communities poorer in the long run by denying workers the wages and benefits to which they are legally entitled and that are essential to building a fair and prosperous economy.”

At Odds

Meanwhile, business groups have filed friend of the court briefs arguing the NLRB should not uphold the ruling. In one, the HR Policy Association, an organization of chief human resource officers, argued that upholding the decision will result in protracted legal proceedings and employers will be on the hook for such litigation.

“This type of ‘legal climate’ will chill the creation and continuation of independent contractor relationships in the country at a time when these types of gig economy relationships should be encouraged to expand and flourish,” the HR Policy Association said in its brief. “Indeed, some of the most innovative, entrepreneurial, and productive advances in recent years in our nation’s economy have evolved from new and expanding independent relationships between individuals and employers.”

In its brief, the World Floor Covering Association argued its members would be adversely affected.

“The standards to classify workers as independent contractors and the application of those standards vary by federal agency and cause great confusion,” the group asserted. “To hold that a simple misclassification violates Section 8(a)(1) of the NLRA would impose strict liability on companies that have applied the standards in good faith, and turn a simple disagreement on the classification into a per se labor violation.”

Upholding the decision would limit opportunities for flooring installers to establish small businesses, the group added.

Velox Background

The initial case was tried in July 2017 in Little Rock, Ark.

Jeannie Edge was a driver for Velox Express, an Indiana-based firm which operated a courier service collecting medical samples from doctors’ offices, clinics and hospitals and transporting them to a laboratory in Nashville, Tenn. Edge was engaged by Velox as an independent contractor. When her contract was terminated, she filed a charge with the NLRB alleging Velox violated the act by canceling her contract, according to filings.

The NLRB administrative law judge ruled that by classifying drivers as independent contractors, it interfered in their protected activity in workplace organization. The NLRB since invited input into the question, “Under what circumstances, if any, should the Board deem an employer’s act of misclassifying statutory employees as independent contractors a violation of Section 8(a)(1) of the [National Labor Relations Act]?”

Section 8(a)(1) deems it an unfair labor practice for employers to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the act. Section 7 in turn guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

Further Input

In addition to Massachusetts and New Jersey, other states taking part in the brief include Pennsylvania, Connecticut, Illinois, Maryland, Minnesota, New Mexico, New York, Oregon, Virginia and Washington.

A report in Bloomberg Law said the NLRB’s former general counsel backed the theory that intentional misclassification violated the act, but it noted that the new GOP-majority board will now rule on the issue.

The debate over the upcoming NLRB decision in this misclassification issue comes as the California Supreme Court ruled in favor of using a tougher test on misclassification that could cast doubt on workers’ arrangements in that state.