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Employee Misclassification Ruling Stirs Debate

Tuesday, September 10, 2019

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A recent ruling by the National Labor Relations Board has determined that the misclassification of employees as independent contractors does not violate the National Labor Relations Act.

Enacted in 1935, the NLRA was created for the purpose of protecting employer and employee rights, including workers’ rights to organize and engage in collective bargaining. Additionally, the United States government also uses the act to prevent private employers from conducting harmful labor and management practices to its workers.

Classification Debate

According to an NLRB news report, the board requested a briefing on the issue regarding a case involving Velox Express, Inc. in February 2018, where Velox was accused of being in violation of labor laws within the transportation industry.

Applying a recent decision made from a previous case—SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019)—which found that workers were employees and not independent contractors, and ultimately protected by the NLRA, it determined that the misclassification of employees as independent contractors did not violate the act itself.

The decision was received after reviewing briefs filed by the general counsel, respondent, charging party and 13 additional briefs received from 28 others.

However, stated in the agency’s report, “Based on that determination, it held that the employer violated the NLRA when it discharged one of these employees for bringing to management’s attention group complaints about the way the employer was treating its workers. The board majority held, however, that the employer’s misclassification of its employees as independent contractors was not a separate violation.”

It was reported that Chairman John F. Ring, joined by members Marvin E. Kaplan and William J. Emanuel, were in the majority opinion. Member Lauren McFerran dissented from the portion of the decision holding that misclassification is not a separate violation.

What Does This Mean for Contractors?

D. Albert Brannen, partner at the law firm of Fisher Phillips in Atlanta, claims the ruling doesn’t mean much for contractors, as it fails to offer relief for those who have misclassified employees. If anything, Brannen notes that it gives employers more latitude to be wrong.

“It is good in that it demonstrates a more reasonable approach by the labor board,” said Brannen.

“It’s more employer-friendly. It’s more practical. It is good that [if you make] a mistake you’re not going to be cited, but under the NLRA … there are no punitive damages. The remedy is you post a notice for 60 days [stating], ‘Employees have these rights, and we won’t violate them.'”

Others, however, claim that the ruling will further hurt the industry as misclassification already points to lower operational costs and further inconveniences contractors who correctly classify their workers to be competitive against others who don’t.

“With this NLRB ruling, you are going to see the already-critical cash-pay culture in some construction markets accelerated along with a decline in project quality and long-established safety standards eliminated because of this misguided policy,” said Dan Langford, executive secretary treasurer of the Southwest Regional Council of Carpenters.

Langford also brought up the issue of skilled labor shortage, claiming that the decision doesn’t help that situation, either.

“The industry is already experiencing a shortage of qualified craftsman,” he said. “These [misclassified] independent contractors are only going to further that problem as the low-bid, bottom-line mentality of the builders that use them certainly won’t include training apprenticeships or giving local residents a chance at a skilled middle class career path.”

Moving forward, Brannen is proposing that a rulemaking is made pertaining to the issue so that a criterion can be established, easing the classification process and helping to settle the industry debate.

Fighting Worker Abuse

This year, PaintSquare Daily News reported on various states working against labor abuse, both in recovering lost wages and legislation efforts to better classify workers. In April, California introduced a bill that codifies the definitions of employees and independent contractors.

Better known as AB 5, the bill would modify the state’s Labor Code, pulling from a 2018 decision in the Dynamex Operations West Inc. v. Superior Court of Los Angeles case, which relied on a test commonly known as the “ABC test” to establish whether a worker is an independent contractor.

The ABC test generally determines workers based on:

  • How a worker in question directs and controls their own work;
  • If a worker’s trade is not one that a hiring contractor typically performs; and
  • If a worker is engaged in a business of the trade in which they perform.

However, other states such as Nevada and Colorado have established punishable laws in relation to proper wages due to error or misclassification, in hopes that contractors will better treat and classify their employees.

Prior to attempts made this year, the United States Department of Labor also launched a website in 2017 in the hopes that it would help employers and workers know the difference between an employee and an independent contractor—and the consequences if workers are misclassified.


Tagged categories: Contractors; Department of Labor; Good Technical Practice; Government; Labor; Laws and litigation; NA; North America; PaintSquare App - Commercial; Workers

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