The National Labor Relations Board (“NLRB”) and the Federal Trade Commission (“FTC”) have entered into a Memorandum of Understanding (“MOU”) whereby the two federal agencies will partner to promote fair competition and advance workers’ rights. The MOU discusses several primary areas of focus:
- Labor market developments relating to the “gig economy” such as misclassification of workers and algorithmic decision-making;
- The imposition of one-sided and restrictive contract provisions, such as noncompete and nondisclosure provisions;
- The extent and impact of labor market concentration; and
- The ability of workers to act collectively.
According to FTC chair Lina M. Khan, “[t]his agreement will help deepen our partnership with NLRB and advance our shared mission to ensure that unlawful business practices aren’t depriving workers of the pay, benefits, conditions, and dignity that they deserve.”
It appears the federal government is taking aim at worker classification standards with this collaboration. The rules for classifying a worker as an employee or an independent contractor were last updated in 2019 when the Trump administration restored the traditional common-law test. This test looks at and weighs various factors when evaluating whether a worker is properly classified as an independent contractor, such as the amount of control a company exercises over a worker, level of skill needed for the job, and manner of payment.
Classification is important because independent contractors are not covered by the National Labor Relations Act (“NLRA”), which means they cannot form unions or seek redress for alleged violations of the NLRA. The MOU between the NLRB and the FTC signals that the issue of worker classification will continue to evolve. Based on the reference to misclassification, any change in policy is likely to result in fewer workers meeting the requirements to be classified as independent contractors. Even more, we could see broad sweeping changes in the classification of workers in the “gig economy.”
For more information about the NLRB and FTC collaboration and how it can impact your business, contact us at email@example.com.
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