September 13, 2019
A recent decision by the NLRB that an employer does not violate the labor law merely by misclassifying employees as independent contractors has been portrayed as giving a green light to the practice, when, in fact, the Board was simply reaffirming what has always been the law.
Misclassification of independent contractors has never been a violation in and of itself under any labor law, but any employer who misclassifies is very likely to commit other violations as a result. A good example is the failure to pay overtime premiums to workers who work longer than 40 hours per week. If the employer views them as independent contractors, it will likely only pay what is required under the contract with the worker. If, on the other hand, the workers are actually employees under federal wage and hour laws, the failure to pay them overtime will be a violation, as will any failure to include them in payroll tax calculations, withhold tax payments, or allow them to participate in any activities protected by the labor laws.
Background: The case came before the NLRB because the General Counsel in the previous administration had pursued what until then was a novel allegation: that misclassification is itself a violation of the law. By rejecting this theory, the Board was simply maintaining the law where it has always been.
Why it is important politically: The decision could generate more controversy as the issues surrounding independent contractors and other contingent workers heats up in the coming political debates. Attention to the gig economy has raised the visibility of non-traditional work relationships. As we have seen in California (see separate story), the issue has the attention of policymakers on both sides of the aisle at all levels of government. The misleading reporting regarding the recent NLRB decision underscores how difficult it will be to maintain an informed, responsible discussion of this complicated area of the law.