Federal Labor Board Says Misclassifying Workers Without More is Not an Unfair Labor Practice

In some good news for San Diego employers, the federal National Labor Relations Board has recently handed down a Guidance stating that an employer’s misclassification of a worker as an independent contractor will not automatically constitute an unfair labor practice under federal law. This is good news for San Diego employers. See Velox Express, Inc., 15-CA-184006, 368 NLRB No. 61. See report here.

At the federal level, unfair labor practices are governed by several statutes, including the National Labor Relations Act (“NLRA”). See 29 U.S.C. § 151 et seq. The NLRA was passed in the 1930s and was an attempt to encourage unionization and protect the collective action of workers. The law established the National Labor Relations Board and prohibited various “unfair labor practices.”

Over the last few years, some NLRB administrative judges and courts have held that it is an unfair labor practice to misclassify a worker as an independent contractor when the worker should have been classified as an “employee.” The decisions did not look to the intent of the employer or to whether the classification was justified under then-current interpretations of the law. Put another way, an employer who misclassified a worker by mistake was still considered to have engaged in an unfair labor practice.

Such a rule — an automatic unfair labor practice for misclassifying a worker — became a massive legal problem here in California because of the Dynamex decision handed down by the California Supreme Court in 2018. Dynamex changed the rules here in the Golden State with respect to how workers are classified. Under the new Dynamex rule, a worker must be classified as an “employee” unless the hiring entity can meet all three of these requirements:

• Little or no control over the worker’s activity
• The work done by the worker is not part of the “core business” of the hiring entity and
• The worker has a separate licensure or is in a profession/trade that is traditionally viewed as an independent trade or contractor

As can be seen, that is a difficult standard to meet. Prior to Dynamex, employers could properly classify workers as independent contractors based on just the first criteria — the control test. But now, most workers in California must be classified as employees.

The interplay between Dynamex and the NLRA has caused great concern for employers in California. Dynamex has been held to apply retroactively. That means that an employer is now liable for misclassifying a worker even though the worker was properly classified under the old test. That is bad enough, but there was also the looming threat of being charged for unfair labor practices under the NLRA. That latter threat has now been removed and, as noted, that is very good news for San Diego employers.

Contact San Diego Corporate Law Today

For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can be reached at (858) 483-9200 or via email. Mr. Leonard has been named a “Rising Star” for four years running by SuperLawyers.com. Mr. Leonard’s law practice is focused on corporate, securities, contract, and intellectual property law for small and medium businesses in the San Diego metro area. Like us on Facebook.

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