NLRB revamps independent contractor standard to expand “employee” coverage
On Wednesday the National Labor Relations Board reverted to an Obama-era standard for determining whether a worker was an “employee” or an “independent contractor.” As you might suspect, the new standard makes it more likely that a worker will be an “employee” and therefore covered by that federal labor law.
The Board, in a 3-1 decision in The Atlanta Opera, Inc., returned to the 2014 standard of FedEx Home Delivery for determining independent contractor status under the National Labor Relations Act. Applying the FedEx standard, the Board majority found that makeup artists, wig artists, and hairstylists working at and for the Atlanta Opera were not independent contractors, but instead were “employees” under the Section 2(3) of the NLRA and thus could pursue union representation. In doing so, the Board overruled a 2019 Trump-era decision, SuperShuttle DFW, Inc.
In Atlanta Opera, the Board majority asserted that it was following longstanding principles for distinguishing “employees” from “independent contractors,” consistent with U.S. Supreme Court precedent. The majority said that its independent contractor analysis will be guided by a list of common-law factors in the legal treatise RESTATEMENT (SECOND) OF AGENCY.
In SuperShuttle, which was overruled Wednesday, the Board had indicated that “entrepreneurial opportunity” for gain or loss should be the “animating principle” in determining whether a worker was an independent contractor. Under the new standard, entrepreneurial opportunity will be considered, but not as a separate “super-factor.” Instead, it will be one factor to be considered along with the traditional common-law factors. Moreover, under the new standard, there must be more than a mere “opportunity” for entrepreneurship: The Board will assess “whether a putative contractor is, in fact, rendering services as part of an independent business.”
In a footnote, the Board majority indicated that the new standard will be retroactively applied to all cases currently pending before the Board.
The traditional common law factors generally focus on the degree of control that an entity has over the work, the presence of special skills of the worker to do the work, and the basis of payment. More specifically, the factors are as follows:
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The extent of control that the business exercises over the details of the work.
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Whether the worker is engaged in a distinct occupation or business.
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Whether, in the locality, the work is usually performed under the direction of the employer, or by a specialist without supervision.
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The skill required in the particular occupation.
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Who supplies the instrumentalities, tools, and place of work for the person performing the work.
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The length of time for which the worker is engaged.
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Whether the worker is paid by the time spent working, or by the job.
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Whether the work is a part of the entity’s regular business.
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Whether the parties believe they are creating an employment relationship.
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Whether the worker is in business.
NLRB Chairman Lauren McFerran (D) hailed the decision, saying, “Applying this clear standard will ensure that workers who seek to organize or exercise their rights under the National Labor Relations Act are not improperly excluded from its protections.”
Members Gwynne Wilcox and David Prouty, both Democrats, joined Chairman McFerran in the majority decision. Member Kaplan, a Republican Trump appointee, would not have overruled SuperShuttle, but he agreed with the majority that the workers at issue in the Atlanta Opera case were employees and not independent contractors.
Will the NLRB’s new and looser standard encourage more legal disputes over the employee-versus-independent contractor issue? Let’s see.
