If you use Independent Contractors are you free from union trouble?

The logical answer to that question would normally be “yes.” Unions are groups of employees that have gathered to provide them the opportunity to deal with wages, hours and working conditions, but if you have been paying attention you know the National Labor Relations Board has been working hard to extend their domain into non-union companies. Attorney Richard J. Reibstein, of the firm Pepper Hamilton LLP, now reports that the NLRB may now be stepping into the independent contractor arena.
The fight

Unfair Labor Practice

According to Reibstein this move stems from a case in which the Teamsters were trying to organize a group of truck drivers around the ports in California. One group of truck drivers were not employees of the company being organized, rather they were independent contractors. The Teamsters filed a complaint that these drivers were misclassified as ICs and should more properly be classified as employees. This would give the Teamsters the right to try to organize them. The Regional Director for the NLRB agreed with the Teamsters and issued an unfair labor practice saying the company “has misclassified its employee-drivers as independent contractors, thereby inhibiting them from engaging in Section 7 activity and depriving them of the protections of the [National Labor Relations] Act.” Yes, you read that correctly having independent contractors could be deemed an unfair labor practice.

Implications

This case is not yet settled and there were some other circumstances that lead to the ULP charge, however, there are some significant implications with this action if it were to happen to your company. If the NLRB finds the drivers to be improperly classified as independent contractors the door is opened to the IRS, USDOL and state agencies to come in and charge the company with FLSA, tax and insurance violations. This company could end up with huge back pay issues, back taxes issues and lack of workers’ compensation coverage, plus now having more workers potentially covered by a union contract.

On-demand workers targeted

Attorney Reibstein feels that this case is a direct result of stated targets of Richard Griffin, the General Counsel of the NLRB.  Reibstein said Griffin “issued a memorandum to all Regional Directors listing the types of cases that are required to be submitted to his Division of Advice where they ‘involve the General Counsel’s initiatives or policy concerns.’  One of the types of cases he listed are those ‘involving the employment status of workers in the on-demand economy.’  Thus, it appears likely that the issuance of the complaint was at the specific direction of the General Counsel.” The USDOL and the IRS have been on the warpath against the use or misuse of independent contractors for a couple of years now. (See Do you know the penalties for improperly classifying employees as Independent Contractors?) Thus, it is no surprise that yet another agency of the government would take up the banner.

The remedy

The fix for this situation and the best way to avoid problems with the government over misclassification is to make sure you have workers classified correctly. I provide some of that guidance in this post Do you know the penalties for improperly classifying employees as Independent Contractors? Take a look and make sure you are doing it correctly.

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