The National Labor Relations Board (“NLRB”) has joined an array of enforcement agencies in cracking down on the misclassification of employees as purported independent contractors. In a recently issued Advice Memorandum, the NLRB General Counsel rendered a legal opinion that classifying the employees in question as independent contractors violated the National Labor Relations Act (“NLRA”), 29 U.S.C. §§ 151, et seq. The NLRB General Counsel reasoned that the misclassification “interfered with and restrained the [employees] in their exercise of Section 7 rights, in violation of Section 8(a)(1)” of the NLRA.
That employee misclassification may be an unfair labor practice in violation of the NLRA adds to the legal exposure for employers attempting to manipulate the independent contractor construct. The United States Department of Labor (“DOL”) increasingly has been coordinating enforcement activity with State Departments of Labor and with the Internal Revenue Service (“IRS”) to prosecute employee misclassification cases under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq., that involve unpaid compensation. Consequently, such wage theft by employers triggers potential liability for back wages, back benefits, liquidated damages, back payroll taxes, civil penalties, employee attorney’s fees, employee litigation costs, and punitive damages. To state the obvious, such legal exposure is enormous in the context of class actions pursued by private counsel like the attorneys at Cummins & Cummins, LLP.
Given misclassifying employees as independent contractors may violate the NLRA, the FLSA, IRS regulations, and other statutory or regulatory authority, employees can engage in protected activity under Minnesota’s whistleblower law, Minn. Stat. §181.932, as well as under the NLRA, the FLSA, or similar statutes when those employees complain about misclassification. Otherwise stated, employers create still more legal exposure for themselves if they terminate or otherwise take adverse action against employees who seek to address employee misclassification in some way. Plaintiffs who pursue whistleblower or similar retaliation claims in this context can recover back wages, back benefits, emotional distress damages, punitive damages, attorney’s fees, and litigation costs.