United States: NLRB Issues Advice Memorandum Claiming That Misclassification Of Employees As Independent Contractors Violates Section 8(A)(1) Of The National Labor Relations Act

Seyfarth Synopsis: In an advice memorandum issued on December 18, 2015, but just released to the public at the end of August, 2016, an Associate General Counsel of the National Labor Relations Board opined that an employer's misclassification of truck drivers as independent contractors, rather than statutory employees, acted to chill the drivers' Section 7 rights and therefore recommended that the Region issue a complaint for a violation of Section 8(a)(1) of the National Labor Relations Act.

The engagement and classification of independent contractors has been an issue of focus for managers, and for the government agencies who enforce various labor and employment laws, for many years. From management's perspective, independent contractors can be a valuable asset. Independent contractors are often retained because of their particular skills or expertise, their extensive experience in a particular area, and to suit companies' needs for specialized work. As it has become popular to retain independent contractors in addition to, and in some cases in place of, a traditional workforce, managers have had to contend with various consequences if they classify individuals as independent contractors and later discover that the government views those same individuals as traditional employees.

Many managers are familiar with the most common consequences of misclassifying employees as independent contractors: tax liability, IRS audits and potential wage and hour claims. As of this past week, however, employers are reminded of another concern when determining whether an individual is an employee or an independent contractor: the National Labor Relations Board.

The NLRB Advice Memorandum

In an advice memorandum issued on December 18, 2015, but just released to the public on August 26, 2016, the NLRB continued its recent trend of targeting companies that utilize independent contractors for scrutiny of their worker classifications. In the memorandum, issued in Pacific 9 Transportation, Inc., NLRB Case No. 21-CA-150875, the Assistant General Counsel advised a Regional Director to issue a complaint for a violation of Section 8(a)(1) where the employer, Pac9, had told its truck drivers that they were independent contractors, not employees, and therefore had no right to form a union. The Assistant General Counsel determined that the employer's conduct had chilled the employees' Section 7 rights.

First, the Assistant General Counsel analyzed whether the drivers in question were, in fact, statutory employees - or whether the employer's classification of the drivers as independent contractors was correct. The Assistant General Counsel explained that, in reviewing a worker classification, the Board looks to a number of factors, none of which is independently determinative. As set forth in an earlier case, FedEx Home Delivery, 361 NLRB No. 55 (Sept. 30, 2014), the Board considers the common law factors set out in the Restatement (Second) of Agency, which include:

  • Extent of the employer's control over the details of the work;
  • Whether or not the individual is engaged in a distinct business;
  • Whether the work in question is typically done independently or under employer supervision in the particular locality;
  • The occupational skill required;
  • The duration of employment;
  • The method of payment;
  • Whether the particular work is part of the employer's regular business;
  • The parties' understanding as to whether they are creating a master-servant relationship; and
  • Whether the principal (the employer) is in the same business as the individual (the employee or contractor).

The Board also considers "whether the evidence tends to show that the putative contractor is, in fact, rendering services as part of an independent business." After reviewing the factors as they pertained to Pac9's drivers, and considering the "independent business factor," the Assistant General Counsel concluded that the Pac9 drivers were statutory employees who had been misclassified as independent contractors.

The Assistant General Counsel went on to analyze whether the misclassification of the Pac9 drivers as independent contractors and the company's statements during their union organizing drive violated the National Labor Relations Act. The Assistant General Counsel concluded that Pac9's actions in classifying the drivers as independent contractors, and informing them that they were ineligible to form a union, chilled the drivers' exercise of their Section 7 rights and therefore constituted a violation of Section 8(a)(1).

Importantly, the Assistant General Counsel acknowledged that "the Board has never held that an employer's misclassification of statutory employees in itself violates Section 8(a)(1)," but went on to state that "there are several lines of Board decisions that support such a finding." He noted that the company's "misclassification of its statutory employees as independent contractors operates as a restraint on and interference with its drivers' exercise of their Section 7 rights." The Assistant General Counsel further postured that the misclassification constituted a "preemptive strike" acting to chill the drivers' conduct during a union organizing campaign. In conclusion, the Assistant General Counsel advised the Regional Director to issue a complaint for a violation of Section 8(a)(1).

Implications for Management

The release of the Advice Memorandum in the Pac9 case is only the most recent act in a trend of NLRB actions on worker classification issues. In General Counsel Memorandum 16-01, issued on March 22, 2016, the General Counsel included worker misclassification and employment status as issues "of particular interest" to the Board. Shortly after GC Memorandum 16-01 was issued, on April 18, 2016, the Regional Director for the Board's Los Angeles office issued a complaint against another transportation employer, alleging that the company misclassified its drivers as independent contractors, "inhibiting them from engaging in Section 7 activity and depriving them of the protections of the Act." It is clear from the General Counsel's communications, including the most recently released Advice Memorandum, that the NLRB is extremely interested in worker classification issues and is targeting companies for unfair labor practice complaints when it believes that the company has misclassified statutory employees as independent contractors.

Proper classification of workers as either employees or independent contractors - as appropriate - has always been an important managerial priority. Misclassification of traditional employees as independent contractors carries tax liabilities, the risk of IRS audits, and the likelihood of wage claims. Employers are familiar with these potential consequences of misclassifying employees and should already be in compliance with worker classification requirements. As the NLRB continues to signal its intent to aggressively target employers cases involving classification of individuals as independent contractors, and perhaps even to expand the law to a new holding that misclassification of statutory employees as independent contractors is in and of itself a violation of Section 8(a)(1), employers have one more reason to be cautious and thorough in their employment classification compliance programs.

Managers who have questions about this alert, or about any employment status or classification matters, are encouraged to contact the Seyfarth attorney with whom they usually work, or any member of the labor and employment department.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions