Legal adventurism in an attempt to make new law


This month's column reports on two National Labor Relations Board administrative law judge decisions involving the issue of whether someone is an employee or an independent contractor. In both cases, former NLRB General Counsel Richard Griffin had urged the ALJ to rule that merely classifying someone as an independent contractor is an independent violation of the National Labor Relations Act. This is legal adventurism in an attempt to make new law.

In one of the cases, the ALJ found independent contractor status and chose not to reach that novel issue. In the second case, the ALJ found employee status and agreed with the NLRB general counsel, finding that the misclassification of the individuals as independent contractors was a per se independent violation of the NLRA. With a new management majority sitting on the NLRB in Washington, let us hope that this legal adventurism will be reversed.

I also report on a new NLRB case involving an employer's texting and confidentiality rules, as well as a new court case addressing the ability to discover social media passwords in litigation.

NLRB ALJ finds contractor status
On Aug. 16, 2016, former NLRB General Counsel Richard Griffin (appointed by President Obama) issued an advice memorandum containing a new legal theory alleging it was an independent violation of the National Labor Relations Act to misclassify individuals as independent contractors. The NLRB has never taken this position.

In a recent case in Minneapolis, ALJ Paul Bogas ruled that delivery drivers were independent contractors, and therefore declined to reach that issue in his case. The ALJ noted that for this novel area of law, he believed that the general counsel, rather than the company, would have the burden of proof.

The case involved delivery drivers who delivered merchandise purchased from Menard's to its customers. The ALJ found independent contractor status and relied on the following factors:

  • The Written Contract – Even though the language of the contract was standardized, the ALJ noted that Menard's has greater bargaining power than the delivery drivers; that was not relevant to independent contractor status. On balance, he found that the delivery drivers had the right to control the manner, means and methods of delivery.
  • Negotiations – The evidence indicated that some contractors, in fact, negotiated increased contract payments.
  • Sequence of Delivery – The delivery drivers controlled the sequence of delivery. The ALJ noted that this was an extremely important factor affecting the profitability of their businesses.
  • Insurance – The contractors purchased and paid the premiums for insurance on their vehicles and were required to name Menard's as an additional insured. The ALJ noted that such a requirement actually weighed in favor of independent contractor status, since, in an employer/employee relationship, the employer generally assumes the risk of third-party damages and does not require indemnification from its employees.
  • Equipment – The delivery drivers purchased their own trucks and had the right to use the trucks to perform services for other companies.
  • Place of Work – The ALJ noted that most of the haulers' work was performed away from the company's facilities or premises; the contractors were not required to return their trucks to Menard's facilities after hours.
  • Engaged in a Distinct Business – The ALJ found that the delivery drivers were engaged in a distinct business of providing hauling and delivery services; the ALJ noted that the company took pains to track outside contractors so as to avoid having to get into the delivery business.
  • Method of Payment – The company did not guarantee the delivery drivers any minimum amount of compensation or number of deliveries; did not pay a salary or hourly rate; and did not withhold taxes, cover the drivers for Workers' Compensation or provide benefits such as health insurance or paid vacation.
  • Intention of the Parties – The ALJ ruled that both the hauling contractors and the company generally believed that they were in an independent contractor relationship.
  • Entrepreneurial Opportunity – The delivery drivers had the right to hire or partner with other individuals, and that gave them the time and ability to work for other companies; the ALJ noted that some contractors either could not or chose not to expand their business; the ALJ was not troubled by a non-compete clause because the drivers had the right to contract with other companies not in competition with Menard's; the written contract gave them the right to subcontract their work to others.
  • Cell Phones – The delivery drivers were required to have cell phones for contact purposes; the ALJ rejected the NLRB general counsel's contention that it was evidence of control and characterized that position as "frivolous."

The ALJ noted:

For better or worse, it has become a common expectation that people will be available by cell phone to employers, customers and clients. It is not unusual for cell phone contact information to be included on business cards and on websites in order to facilitate contact. According to one recent study, 95 percent of all American adults have cell phones. See www.pewinternet.org/fact-sheet/mobile (Pew Research Report from January 2017.

Misclassification of contractors a per se violation
In a case originating in Region 21 of the NLRB in Los Angeles, ALJ Dickie Montemayor ruled that drivers for Intermodal Bridge Transport (hereinafter "company" and "IBT") are employees under the National Labor Relations Act, and not independent contractors.

The company used two types of drivers: those who lease their trucks and those who own their trucks. The litigation involved only the drivers who lease their trucks from the company.

While these cases are always fact-intensive, the ALJ emphasized the following factors in finding employee status:

  • Many drivers could not speak English and no translation services were provided; they were simply instructed where to date and initial the agreement.
  • The agreements were not negotiable.
  • The drivers were not provided a copy of the full agreements they signed.
  • The agreements did not provide a fixed term, but rather were of indefinite duration by either party on 24 hours' notice.
  • The company provided the drivers a safety vest with its logo on it and required the vest to be worn.
  • The company provided each driver a radio at the beginning of a shift; drivers were required to use the radio to contact the company. The drivers would call in on the radio after they finished delivery. The drivers were required to return the radios to the company at the end of the day.
  • The drivers were provided a safety and policies manual, which was printed only in English; failure to follow the company's policies resulted in progressive discipline, which was set out in the policy manual. The manual specifically prohibited the drivers from contacting customers directly.
  • While the drivers leased the company's trucks for $60 per day, that amount was not negotiable.
  • The company required drivers to complete a driving proficiency test and a written test. Drivers were given entry-level "driver awareness" training and HAZMAT training.
  • The drivers were required to keep the trucks clean and were assessed a fee for not doing so.
  • The company prohibited smoking in the trucks.
  • The drivers operated under the name of the company and drove trucks with both the DOT and CA numbers of the company displayed on the doors.
  • Drivers were required to complete paperwork, including a daily inspection report for the trucks, delivery slips, hours of service logs and daily manifests; the inspection form had to be turned in daily.
  • The ALJ found entrepreneurial opportunity was only theoretical and not actual; none of the drivers provided services to any company other than IBT while leasing trucks owned by the company.

After reaching the conclusion that the drivers were employees and therefore misclassified under the NLRA, the ALJ said the determination was not merely a mechanism that triggered the applicability and protections of the act, but rather that misclassification rises to the level of a per se violation of Section 8(a)(1) of the NLRA.

There is no legal basis for this finding of a per se violation. The legislative history of the 1947 Taft-Hartley Amendments to the NLRA added the independent contractor exclusion from the act. The legislative history makes it clear that the NLRB was to apply the common law and not to narrowly construe its applicability.

What is especially egregious about this decision is that the ALJ relied upon the NLRB's 2014 decision involving Federal Express. That very decision was reversed by the U.S. Court of Appeals for the D.C. Circuit; that Court found independent contractor status and specifically rejected the NLRB's rejection of "entrepreneurial opportunity."

The NLRB, as an agency, has an arrogant policy it calls "non-acquiescence." Under that policy, the NLRB does not recognize decisions of the U.S. Courts of Appeal that overrule it. Let us hope that the newly constituted NLRB with a management majority rejects this finding of ALJ Montemayor.

Texting and confidentiality rules are legal
The employer had the following work-related rules:

  • All documents are considered confidential and the sole property of Green Apple Supermarket and are not to be distributed or taken off the premises. There is to be no copying, faxing or photographing of documents. Failure to comply may result in dismissal and legal action.
  • Texting and playing electronic games is strictly prohibited and will result in a warning: three warnings will result in a dismissal.

The union representing the employees filed an unfair labor practice charge, alleging that the rules "interfered with, restrained, or otherwise coerced employees in the exercise of their rights under the National Labor Relations Act."

ALJ Kenneth Chu ruled that the employer's rules are lawful. The ALJ noted that the rules do not explicitly restrict activities protected by Section 7, and that the rules were not promulgated in response to union activity. There was no evidence that the rules had been applied in any way to coerce or restrain employees in the exercise of their rights.

The rule with respect to documents is very important. In recent years, the NLRB has been very disparaging of employer property rights. If this ALJ case is appealed to the full board in Washington, we now have a fully constituted board with three management appointees in the majority. Let us hope they maintain the legality of this rule.

Social media passwords not disclosed
The plaintiff had filed suit against the employer for sexual harassment and an intentional infliction of emotional distress. In the discovery process, the employer wanted to compel the plaintiff to provide direct access to her social media accounts – or, in the alternative, provide copies of her social media communications. The employer's discovery requests in that regard related to the "incident" described in the complaint.

The court ruled that requiring the plaintiff to provide her social media passwords would constitute a wholesale invasion of privacy, and would be "far outside the bounds of proportionality." However, the court did rule that the employer's alternative request for copies of the plaintiff's social media materials regarding the "incident" described in the complaint was acceptable.

In the employer's court filings, it attempted to expand the request to social media communications and photographs that revealed or related to "any emotion or feeling or mental state" of the plaintiff. The court denied this request as "too late," noting that the requests that were the subject of the hearing only related to the "incident" and did not mention the plaintiff's mental or emotional state, generally.

If the employer had timely requested information about the plaintiff's general mental or emotional state, it probably would have been provided, due to the fact that plaintiff was claiming "mental distress" as part of her lawsuit.

L. Michael Zinser is the founding partner of The Zinser Law Firm in Nashville, Tenn. The firm, which has a heavy concentration of clients in communications media, represents management in the area of labor and employment. Zinser can be reached at (615) 244-9700 or mzinser@zinserlaw.com.

Zinser, independent contractor, NLRB


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