Proffitt & Sons (10-CA-185899)

United States Government

National Labor Relations Board

OFFICE OF THE GENERAL COUNSEL

Advice Memorandum

DATE:

March 30, 2017

TO:

Claude T. Harrell, Jr. Regional Director

Region 10

FROM:

Barry J. Kearney, Associate General Counsel

Division of Advice

SUBJECT: Proffitt & Sons, Inc. &

JAC Jack Construction, LLC

Case 10-CA-185899

177-2414-0000-0000

177-2484-5000-0000

177-2484-5033-0133

512-5006-5050-0000

512-5006-5053-0000

512-5006-5076-0000

The Region submitted this case for advice as to 1) the employment status of the

Employers’ drywall installers, and 2) whether the Employers have violated Section

8(a)(1) by misclassifying the drywall installers as independent contractors rather than

employees. We conclude that the Employers did not violate Section 8(a)(1) because the

Employers never communicated to the drywall installers that they were independent

contractors. Accordingly, there is no need to determine their employment status.

FACTS

JAC Jack Construction, LLC supplied drywall installers to Proffitt & Sons, Inc.

(collectively “Employers”) for use on its projects. These workers were paid by JAC

Jack in checks that did not have any tax withholdings. The workers did not sign

contracts or receive employee manuals. At no point were the workers told by the

Employers that they were independent contractors. There is no evidence that the

Employers gave the workers any tax documents, either W-2 forms or 1099 forms.

In August and September 2016, the Department of Labor’s Wage and Hour

Division (“DOL”) investigated JAC Jack Construction for potential violations of the

Fair Labor Standards Act (“FLSA”) and the Family Medical Leave Act. Determining

that JAC Jack’s workers were employees under the FLSA, DOL found that JAC Jack

and Proffitt & Sons were joint employers of the employees. DOL also concluded that

the Employers had not been paying the employees overtime wages as required by the

FLSA

investigated JAC Jack Construction for potential violations of the

Fair Labor Standards Act (“FLSA”) and the Family Medical Leave Act. Determining

that JAC Jack’s workers were employees under the FLSA, DOL found that JAC Jack

and Proffitt & Sons were joint employers of the employees. DOL also concluded that

the Employers had not been paying the employees overtime wages as required by the

FLSA. When confronted by DOL, JAC Jack admitted that the workers were probably

employees, stating that it had been paying them as independent contractors on the

advice of a friend in the industry. JAC Jack agreed to pay eleven workers a little over

$11,000 in back wages, and committed to pay overtime in the future.

Case 10-CA-185899

- 2 -

On October 11, 2016, the Mid-South Carpenters Regional Council (“Union”)

filed the instant charge, alleging that the Employers were joint employers, and had

violated Section 8(a)(1) of the Act by misclassifying their employees as independent

contractors.

ACTION

We conclude that, regardless of whether the drywall installers are employees

under the Act, the Employers did not violate Section 8(a)(1) since they at no point

communicated that the workers were being classified as independent contractors.

Section 8(a)(1) makes it unlawful for an employer “to interfere with, restrain, or

coerce employees in the exercise of” employees’ Section 7 rights.1 Although the Board

has never held that an employer’s misclassification of statutory employees as

independent contractors in itself violates Section 8(a)(1), several lines of Board

decisions support such a finding

ed as independent contractors.

Section 8(a)(1) makes it unlawful for an employer “to interfere with, restrain, or

coerce employees in the exercise of” employees’ Section 7 rights.1 Although the Board

has never held that an employer’s misclassification of statutory employees as

independent contractors in itself violates Section 8(a)(1), several lines of Board

decisions support such a finding.

First, the Board has held that an employer violates Section 8(a)(1) when its

actions operate to chill or curtail future Section 7 activity of statutory employees.2 In

Parexel International, the Board made clear that an employer’s “preemptive strike to

prevent [an employee] from engaging in activity protected by the Act” violates Section

8(a)(1) because of its chilling effect on employees’ future exercise of their Section 7

rights.3 Even if an employee has no history of Section 7 activity, employer action to

prevent that employee from engaging in protected activity in the future “interferes

with and restrains the exercise of Section 7 rights and is unlawful without more.”4

1 29 U.S.C. § 158(a)(1). In contrast, an employer does not violate the Act if it

interferes with, restrains, or coerces the exercise of what would otherwise constitute

Section 7 rights by individuals who are not statutory employees. See Wal-Mart Stores,

Inc., 340 NLRB 220, 223 (2003) (employer’s instruction to group of twenty-two

putative statutory supervisors that they could not engage in union activity only

violated Section 8(a)(1) with respect to the four who were actually statutory

employees).

2 See, e.g., Parexel International, LLC, 356 NLRB 516, 518–19 (2011) (employer

violated Section 8(a)(1) by discharging an employee to prevent her from discussing

wages with other employees); Lafayette Park Hotel, 326 NLRB 824, 825 (1998)

(maintenance of rules that would reasonably tend to chill employees’ exercise of

Section 7 rights violates Section 8(a)(1)), enforced mem., 203 F.3d 52 (D.C. Cir. 1999).

3 356 NLRB at 517, 519.

4 Id

56 NLRB 516, 518–19 (2011) (employer

violated Section 8(a)(1) by discharging an employee to prevent her from discussing

wages with other employees); Lafayette Park Hotel, 326 NLRB 824, 825 (1998)

(maintenance of rules that would reasonably tend to chill employees’ exercise of

Section 7 rights violates Section 8(a)(1)), enforced mem., 203 F.3d 52 (D.C. Cir. 1999).

3 356 NLRB at 517, 519.

4 Id. at 519.

Case 10-CA-185899

- 3 -

The Board also noted that suppression or chilling of future protected activity lies at

the heart of most unlawful employer retaliation against past protected activity.5

Similarly, Board precedent holding unlawful an employer’s adverse action taken on

the mistaken belief that an employee engaged in protected concerted activity is

premised on the notion that the chilling of future protected activity violates the Act.6

Second, employer statements to employees that engaging in Section 7 activity

would be futile violate Section 8(a)(1).7 Thus, in Sisters’ Camelot, the Board found

that the employer violated Section 8(a)(1) by indicating that union organizing would

be futile when it informed its canvasser employees, who had been misclassified as

independent contractors and were attempting to organize, that it would never accept

an employer-employee relationship with its workers.8

Third, the Board has found misstatements of law to constitute unlawful

interference with employees’ Section 7 rights if the statement reasonably insinuates

adverse consequences for engaging in Section 7 activity.9 For example, employer

statements suggesting that employees could “lose their jobs” as a consequence of

5 Id.

6 See, e.g., United States Service Industries, Inc., 314 NLRB 30, 31 (1994), enforced

mem., 80 F.3d 558 (D.C. Cir. 1996).

7 See, e.g., M.D. Miller Trucking & Topsoil, Inc., 361 NLRB No. 141, slip op. at 1 (Dec

onably insinuates

adverse consequences for engaging in Section 7 activity.9 For example, employer

statements suggesting that employees could “lose their jobs” as a consequence of

5 Id.

6 See, e.g., United States Service Industries, Inc., 314 NLRB 30, 31 (1994), enforced

mem., 80 F.3d 558 (D.C. Cir. 1996).

7 See, e.g., M.D. Miller Trucking & Topsoil, Inc., 361 NLRB No. 141, slip op. at 1 (Dec.

16, 2014) (concluding that employer’s statement that employees’ grievance would go

nowhere constituted unlawful threat of futility); North Star Steel Co., 347 NLRB

1364, 1365 (2006) (employer’s statement that collective bargaining would not result in

employees obtaining benefits other than what employer chose to give them and

unionization would lead employer to choose to give them less violated Section 8(a)(1)

because employees “could reasonably infer futility of union representation”).

8 363 NLRB No. 13, slip op. at 6.

9 See, e.g., BP Amoco Chemical-Chocolate Bayou, 351 NLRB 614, 617, 618 & n.22

(2007) (employer’s flyer that misled employees by creating impression that employees

would have to give up customary wage increases as a “lawful and ineluctable

consequence” of bargaining violated Section 8(a)(1)); Taylor-Dunn Mfg. Co., 252

NLRB 799, 799 n.2 (1980) (misstating law by implying that union would have right to

demand that employees pay union fines and assessments and accede to contractual

dues checkoff to retain their jobs was unlawful in context of other threats), enforced

mem., 679 F.2d 900 (9th Cir. 1982).

lated Section 8(a)(1)); Taylor-Dunn Mfg. Co., 252

NLRB 799, 799 n.2 (1980) (misstating law by implying that union would have right to

demand that employees pay union fines and assessments and accede to contractual

dues checkoff to retain their jobs was unlawful in context of other threats), enforced

mem., 679 F.2d 900 (9th Cir. 1982).

Case 10-CA-185899

- 4 -

engaging in an economic strike inaccurately describe economic strikers’ rights and

therefore constitute unlawful threats of reprisal.10

Based on the foregoing principles, the Division of Advice concluded in Pacific 9

Transportation,11 that employers violated Section 8(a)(1) by misclassifying their

employees as independent contractors. As outlined above, this theory of violation is

predicated on the future chilling effect on employees that the misclassification

engenders, and more broadly, the misclassification’s interference with Section 7

activity. However, in each of the above-cited cases, the employer explicitly

communicated that it regarded its employees as independent contractors by requiring

the employees to sign a document to that effect. If employees are unaware of a

misclassification, they cannot be negatively affected by it; there can be no chilling

effect without knowledge of the misclassification.

Here, the Employers never communicated to their employees that they were

independent contractors. While JAC Jack admitted to DOL that they were paying

their employees “as independent contractors” by ignoring overtime law, there is no

evidence this statement was ever communicated to the Employers’ employees. There

is also no evidence that employees knew the reason for any underpayment was

because the Employers were paying them as independent contractors. As for the

failure to include withholdings in employees’ paychecks, it also did not necessarily

communicate that employees were independent contractors

me law, there is no

evidence this statement was ever communicated to the Employers’ employees. There

is also no evidence that employees knew the reason for any underpayment was

because the Employers were paying them as independent contractors. As for the

failure to include withholdings in employees’ paychecks, it also did not necessarily

communicate that employees were independent contractors. There are many reasons

for not making such withholdings, especially tax avoidance on the part of both

employers and employees. We conclude that since the Employers never communicated

to employees that they were independent contractors, they did not impede employees’

Section 7 rights.

Because we conclude that the alleged misclassification did not violate Section

8(a)(1), there is no need to determine the employment status of the Employers’

employees. Accordingly, the Region should dismiss the complaint, absent withdrawal.

/s/

B.J.K.

ADV.10-CA-185899.Response.Proffitt.

10 See, e.g., Fern Terrace Lodge, 297 NLRB 8, 8–9 (1989) (statement that permanently

“replaced striker is not automatically entitled to his job back just because the strike

ends” unlawful, because economic strikers are automatically entitled to their jobs

back, or, if their job is unavailable, preferential hiring to similar openings).

11 Case 21-CA-150875, Advice Memorandum dated Dec. 18, 2015.

(b) (6), (b) (7