May 25, 2022

McKenzielee Blog

Wicked Clever House Experts

The NLRB Looks at the ‘Independent Contractor’ Scam

3 min read

On December 27th, in the middle of the most news-less week of the year, the National Labor Relations Board (NLRB) announced that it was reconsidering the concept of who is really an independent contractor, and who is really an employee whose employer had misclassified him or her as a way of reducing wages and withholding benefits. The board invited briefs from interested parties as to whether the Trump-dominated NLRB’s ruling, which effectively limited the definition of “employee,” should be rejected in favor of an earlier, more realistic standard.

But a more fundamental challenge to the misclassification of American workers also looks to be in the offing. In a memo sent earlier last year to attorneys in the NLRB’s regional offices, the Board’s general counsel, Jennifer Abruzzo, asked them to submit cases to her that raised the question of whether the very act of misclassifying workers as independent contractors was itself a violation of the National Labor Relations Act—an unfair labor practice by virtue of denying workers the right to collective bargaining and a voice on the job.

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Should Abruzzo find that to be the case, and the now Biden-dominated board uphold her ruling, the implications for American workers could be profound. Today, when courts rule that a worker has been misclassified (as a series of rulings in California have), they can label the employer’s conduct a violation of state wage and hour laws, and order the employer to compensate the litigant for lost pay and damages. They cannot, however, make the employer stop misclassifying workers.

Even when employers have been compelled to pay out millions of dollars in such settlements, they haven’t stopped misclassifying. “We win everything in court,” says Julie Gutman Dickinson, who has won every suit she’s filed on behalf of misclassified truckers at the Ports of Los Angeles and Long Beach. “But misclassification is still the standard practice” in the port trucking industry—not to mention at such mega-companies as Uber, Lyft, and FedEx.

An NLRB ruling that misclassification violates the NLRA, however, could do what court rulings up to now have not: compel employers to turn their de facto employees into de jure employees. Gutman Dickinson began making such arguments to NLRB regional offices several years ago, but those cases were settled before they reached the Board. In 2019, when it still had a majority of Trump appointees as members, the Board ruled in its Velox decision that misclassification did not violate the NLRA, which they were pledged to uphold and implement. But in a dissenting opinion, Board member Lauren McFerran argued that it did violate the law. Today, McFerran chairs the now-Bidenized Board, and the memo that Biden appointee Abruzzo sent to the Board’s regional offices will likely turn up cases whose particulars could enable both Abruzzo and the Biden-appointed majority to rule that a walking, talking, quacking duck is actually a duck, regardless of what its employer might contend.

The implications for our gig-ified economy could be huge, as could the implications for our gridlocked supply chain. Today, of the roughly 12,000 truck drivers who transport goods to warehouses from the Ports of Los Angeles and Long Beach, the site of around 40 percent of all seaborne imports in the U.S., nearly all are independent contractors, who sit unpaid in hours-long lines until they get their containers, who must pay for all their own expenses, and whose average yearly income, when those expenses are taken into account, is roughly $28,000, according to a study from the UC Berkeley Labor Center. When word goes out, as it does on many days, that the wait for containers is many hours long, many of the truckers just don’t show up. And the supply chain creaks even more slowly.

At the national level, labor law hasn’t been fundamentally altered since the 1947 enactment of the Taft-Hartley statutes. Today’s NLRB shows heartening signs that it might just update the law’s interpretation so it catches up with at least some of the changes the economy has seen over the past 75 years.

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