A federal labor case involving worker classification at an Indiana medical supply delivery company could have broader implications for the on-demand economy, as the National Labor Relations Board looks for input from the business community and labor advocates.

An administrative law judge, ruling last year against Velox Express Inc., said worker misclassification is itself a violation of the National Labor Relations Act. Velox had deemed its drivers independent contractors rather than employees.

The ruling drew rebuke from big business advocates, who called the judge's conclusion a “drastic departure from established precedent.”

This week, the NLRB invited comments from the public about what circumstances the board should deem the misclassification of a worker a violation of the National Labor Relations Act. The administrative judge's decision marked the first where misclassification itself was found to be a violation of labor of law.

Worker classification is a thorny issue in the on-demand economy, where companies such as Uber Technologies Inc. and Lyft Inc. were built around contractors who get to work whenever they want, wherever they want. Labor advocates contend the business model precludes workers from receiving certain benefits of employee status.

The U.S. Chamber Litigation Center and the Coalition for a Democratic Workplace filed a friend-of-the-court brief in the Velox dispute that said treating misclassification as a “stand-alone” violation is a novel interpretation of law.

Morgan, Lewis & Bockius partner Harry Johnson in Los Angeles, who is a former NLRB member, and associate Julia Sturniolo in Philadelphia are co-counsel to the U.S. Chamber of Commerce on behalf of the U.S. Chamber Litigation Center. Benjamin Fultz and Rachael Dahlman of Kentucky-based Fultz Maddox Dickens represent Velox. The attorneys did not immediately respond to requests for comment.

Numerous courts and administrative proceedings in recent years have addressed specific instances of whether a company's workers should be considered employees rather than contractors.

A California federal magistrate recently found Grubhub's delivery drivers are independent contractors. An NLRB lawyer in 2016, in an advice memo, said Postmates Inc. couriers were employees, not contractors.

In the Velox case, the worker, Jeannie Edge, complained that workers were treated as employees, even though the couriers were expected to sign an independent contractor agreement that did not require the company to withhold income tax, provide health insurance of cover workers compensation insurance. She and fellow couriers discussed the conditions at the company before she was fired.

“A threshold issue in this case is whether the drivers were independent contractors or employees, since the [National Labor Relations Act] accords rights to the latter but not the former,” Arthur Amchan, the administrative law judge, wrote in September.

Amchan continued: “Very often the line between 'employee' and 'independent contractor' is a fine one. However, in determining whether individuals fall on one side or another, one must keep in mind the admonition of the United States Supreme Court that 'administrators and reviewing courts must take care to assure that exemptions from the NLRA coverage are not so expansively interpreted as to deny protection to workers the act was designed to reach.'”

Amchan said any “close call” should err on employee status. He found that the workers at Velox should not be considered independent contractors because Velox exercised control over the workers, who were not free to work when they want, needed to request permission for days off and had to wear certain clothes and own Android phones.

Linda Mohns, counsel for the NLRB general counsel's office, said in November that the administrative law judge made the correct determination. The “pervasive control exercised by the [company] weighs in favor of employee status,” Mohns said in an administrative filing in the case.

“Board precedent establishes that when a company's control over a worker extends beyond the result achieved to include the means and manner of how that work is accomplished, it will weigh in favor of finding the worker to be an employee,” Mohns wrote.

Mohns argued that under the labor act, it is unlawful for an employer to interfere or restrain an employee's rights. A company's action of classifying a driver as an independent contractor would chill or curtail these rights.

“Even if an employee has no history of Section 7 activity, if the employer acts to prevent that employee from engaging in protected activity in the future, 'that action interferes with and restrains the exercise of Section 7 rights and is unlawful without more,'” Mohns wrote in the filing. “In the instant case, respondent's misclassification of its statutory employees as independent contractors operates as a restraint on and interference with its drivers' exercise of their Section 7 rights.”