• NLRB's Office of General Counsel Issues Advice Memorandum on Independent Contractors
  • October 11, 2016
  • Law Firm: Shawe Rosenthal LLP - Baltimore Office
  • The Office of the General Counsel (OGC) of the National Labor Relations Board has released an advice memorandum in which it asserts that the misclassification of employees as independent contractors is a violation of the National Labor Relations Act.

    The Board’s Independent Contractor Test. In the memo, the OGC notes that, in determining whether a worker is an employee or independent contractor, the Board takes the following factors into account, with no one factor being determinative:

    a. The extent of control which, by the agreement, the [employer] may exercise over the details of the work.
    b. Whether or not the one employed is engaged in a distinct occupation or business.
    c. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision.
    d. The skill required in the particular occupation.
    e. Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
    f. The length of time for which the person is employed.
    g. The method of payment, whether by the time or by the job.
    h. Whether or not the work is part of the regular business of the employer.
    i. Whether or not the parties believe they are creating the relation of master and servant.
    j. Whether the principal is or is not in the business.

    In addition to these factors, the Board considers “whether the evidence tends to show that the putative contractor is, in fact, rendering services as part of an independent business.” The “independent-business factor” includes whether the putative contractor:
    • has a significant entrepreneurial opportunity
    • has a realistic ability to work for others
    • has a proprietary or ownership interest in his or her work, and
    • has control over important business decisions, such as scheduling of performance, hiring and assignment of employees, equipment purchases, and investment of capital
    Misclassification Is Violation of the NLRA. The memo then states that the misclassification of employees as independent contractors violates Section 8(a) of the National Labor Relations Act. Section 8(a) makes it unlawful for an employer “to interfere with, restrain, or coerce employees in the exercise of” employees’ Section 7 rights to engage in concerted activity regarding the terms and conditions of employment. Because independent contractors are not covered by the Act, an employer who tells employees that they are independent contractors is denying them their rights under the Act.

    What This Means for Employers. Employers should be aware that the issue of misclassification of employees as independent contractors is a topic of heightened interest for federal agencies generally. In 2015, the Department of Labor issued an Administrator’s Interpretation regarding independent contractor status, while the Equal Employment Opportunity Commission more recently weighed in with an article on the same topic. The OGC is proposing an expansion of the scope of liability for employers, by making misclassification itself a violation of the Act.