A dispute between the Teamsters and a company that provides multiple logistics services — which have faced off previously before the National Labor Relations Board — is being looked at by labor attorneys as a key battleground in the fight over independent contractor status and unionization.
On July 20, William Cowen, a regional director at the National Labor Relations Board (NLRB), ruled that STG Logistics workers at two California facilities are employees, not independent contractors, as the company has held.
If it sounds like a familiar news report, that isn’t surprising. The NLRB ruled last year that workers at the intermodal division of STG Logistics, which had just been acquired from XPO for $710 million (NYSE: XPO), were employees and not independent contractors. That decision led to a union representation vote, which the Teamsters lost.
In this latest decision, Cowen recapped actions by STG personnel leading up to the failed unionization vote, which took place in March. Among them: employees were “threatened … with loss of benefits by telling the employees if they selected the union as their representative or collective bargaining, (STG) would determine many aspects of the employees’ work including schedules, cargo and truck ownership.”
After going through several other accounts of employer actions during the unionization drive last year, Cowen described them as “unfair labor practices.” He also said those actions “affect commerce under the meaning” of two sections of the National Labor Relations Act (NLRA), which is the governing legislation for the NLRB, opening the door for penalties tied to the potential violation of the act.
The “remedy” for those actions, Cowen wrote, is to “reclassify as employees drivers who have been misclassified as independent contractors and make them whole, including direct or foreseeable consequential or pecuniary harm they incurred as a result of the misclassification and other unlawful conduct.”
Cowen’s decision also orders STG to provide the Teamsters access to “nonwork areas” at its Commerce, California, and San Diego locations. A trial before the full NLRB was scheduled by Cowen for Dec. 11.
A spokeswoman for STG declined to comment on the NLRB action.
Violating the NLRA could bring penalties
Cowen’s order to make the workers “whole” could involve money. And that is seen as a major victory for the Teamsters.
It’s “a huge deal” because its central core is that a misclassification of a worker’s status is a violation of the NLRA and the threat of penalties, according to Julie Gutman Dickinson, an attorney with the firm of Bush Gottlied, which represents the Teamsters.
Although the workers at STG, which describes itself as “North America’s largest managed outsource logistics provider,” are not Teamsters members and explicitly rejected membership in their recent vote, the issue is significant to the Teamsters and other unions because independent contractors can’t organize. But the union organizers view the case as possibly creating a disincentive to labeling workers as independent contractors and therefore incentivizing classification as employees, where unionization becomes possible.
The Teamsters and its attorneys believe the latest STG case could help overturn a Trump-era NLRB case known as Velox Express, decided in 2019.
In the Velox case, according to a blog entry written by Richard Reibstein, an attorney specializing in independent contractor issues with the law firm of Locke Lord, the NLRB reached several conclusions. Among them were that Velox, a transporter of medical shipments, had incorrectly classified the Velox workers as independent contractors. The board also found that Velox had “committed an unfair labor practice by terminating a worker for engaging in protected activity.”
But Reibstein wrote that the NLRB found that Velox had not “violated the law by its stand-alone act of misclassifying the workers and advising the workers that they are independent contractors.”
There had been another case in 2022 that had the potential to challenge the Velox decision, known as Deco Logistics, again, dealing with the question of drivers and their independent contractor status. A decision by the NLRB’s General Counsel Jennifer Abruzzo, similar to the Cowen decision regarding misclassification as a violation of the NLRA, set a path toward the full NLRB overturning the Velox precedent. But Dickinson said that case was settled before it ever got to the NLRB, foreclosing the chance of it setting a new precedent.
In a blog post from April 2022, attorneys for the firm of Sheppard, Mullin, Richter & Hampton said Abruzzo’s decision regarding Deco Logistics was “ further evidence of the continuing ideological shift in the Democratic-majority Board, that may ultimately overrule the Board’s prior decision in Velox Express.”
“The Complaint in Deco Logistics does not set forth any allegations about the factors pertaining to misclassification, which may be grounds for dismissal,” they added. “The lack of any factual allegations demonstrates the General Counsel’s attempt to create a standalone violation of the Act as a matter of law — regardless of whether the company has a good faith belief that the workers are properly classified.”
Reibstein’s post on the intersection between Velox and the Deco Logistics case was written before it was settled. In it, he said that if Deco Logistics was used to overturn Velox by the full NLRB board, which was Republican-controlled at the time of the Velox decision, “that decision will be contested before a federal appellate court with possible review by the U.S. Supreme Court.”
NLRB independent contractor definition battles on several fronts
The NLRB definition of independent contractor already is going through changes as a result of the so-called Atlanta Opera case, which overturned the precedent known as Super Shuttle. Without going into all the details, the cases can be summed as noting that Atlanta Opera makes it easier for the NLRB to find a worker is an employee rather than an independent contractor; Super Shuttle made it more difficult.
The Atlanta Opera case may make it to the courts. Last year, before a decision in June was handed down by the full NLRB, Reibstein wrote that any attempt to overturn Super Shuttle would face an uphill climb.
“If past decisions are a guide, the NLRB would not likely receive a favorable result by a federal appellate court,” Reibstein wrote. “We do not expect the courts will likely accept a new NLRB independent contractor test to replace the current standard under SuperShuttle because the U.S. Court of Appeals has twice reversed the Board when it changed the test for IC status. The courts generally do not favor the NLRB constantly changing its views and playing ping-pong in its decisions.”
The legal question raised by the NLRB action — so far — in the STG case is not specifically about the definition of an independent contractor, but rather whether misclassification is a violation of the NLRB act, which opens the door to penalties.
Regardless of how the STG case settles out, Reibstein’s words regarding the Deco Logistics case could still be seen as being relevant.
The actions by the NLRB to create a “standalone violation of the National Labor Relations Act for misclassification should send a firm message” to companies that use independent contractors that might ultimately be judged as employees. Companies doing so should “document their good faith belief” why the workers are properly classified, and review their current relationships to determine if they can be “enhanced … by restructuring, re-documenting or re-implementing such relationships in a customized and sustainable manner.”
Another recommendation: don’t do what Velox did, which Reibstein described as “terminating or otherwise retaliating against workers classified as ICs where such workers have supported a union’s effort to organize them and others performing similar services.”
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