I have been worried for some time now about the threat of increasing cooperation between agencies, federal and state, when it comes to assessing independent contractor status. Well, my fear has reached a new level of concern by the announcement that two federal agencies will be collaborating to analyze businesses and their relationships with alleged independent contractors. They will be focusing on, among other things, antitrust issues. The agencies are the National Relations Board (NLRB) and the Federal Trade Commission (FTC).
In a Memorandum of Understanding (MOU), the agencies advised they will share information and engage in inter-agency consulting, as well as providing training and education to the employer community. This is much like the MOU that the NLRB and the DOL Wage-Hour Division entered into this year. The NLRB is now taking an almost leading position to work hand in with these other federal agencies to facilitate “fair competition” and the advancement of worker rights, which is another way, in my view, of facilitating union organizing.
It appears that the focus of the MOU and agency efforts will be the so-called “gig economy” and the enormous number of independent contractors that populate these businesses. There is an alleged largescale misclassification of workers in this industry and this hampers the ability of workers to organize or become unionized, as “true” independent contractors are not employees under the National Labor Relation Act (or the Fair Labor Standards Act). Now, under the MOU the agencies will have more laws available to them to support these efforts to “eradicate” misclassification and facilitate the unionization of workers. Significantly, the MOU allows “information sharing, cross-agency training, and outreach in areas of common regulatory interest.”
The NLRB has opined, in the context of the MOU, that “when businesses interfere with [the right under federal law to act collectively to improve their working conditions], either through unfair practices, or anti-competitive conduct, it hurts our entire nation.” The head of the FTC stated that the FTC is “committed to using all tools at its disposal to promote free and unfair labor markets in which companies must compete with each other to attract and retain workers.” She stated that the agencies, through the MOU, want to “crack down on anticompetitive mergers and unfair practices that deny workers and their families the pay, benefits, and conditions they deserve.”
The answer here is to be proactive. Employers should understand full well the law, state and federal, regarding who is/is not an independent contractor and then ensure that they document as best they can these requirements. The putative independent contractor must do work for others and derive some income from sources other the employer under scrutiny. The best way to do this (and I have done it dozens of times for clients) is to conduct an internal scrutiny of all independent contractors (i.e. 1099 recipients) and match the terms of their engagements against the applicable regulatory and statutory criteria.
Fix it if it is broken…