The National Labor Relations Board (NLRB) has revisited the standard under the National Labor Relations Act for determining whether a worker is an independent contractor. The Atlanta Opera, Case 10-RC-276292 (NLRB June 13, 2023).
First, a little background. In its 2019 SuperShuttle DFW decision, the Board made it easier for companies to establish that their workers are independent contractors (rather than employees) by clarifying and emphasizing that classification as an independent contractor is strongly indicated when a worker has significant entrepreneurial opportunity for economic gain. Case 16-RC-010963 (NLRB Jan. 25, 2019).
The distinction between employees and independent contractors is significant because: (1) many companies, including those involved in the gig economy, rely on independent contractors to reduce the costs of supplying employee job benefits and paying employment taxes; and (2) employees, but usually not contractors, are protected by state and federal labor laws.
The Atlanta Opera case involved a union’s petition to represent a group of makeup artists, wig artists, and hair stylists, and whether those workers are employees (and would have the right to organize under the NLRA as employees). The current NLRB has now reconsidered the SuperShuttle decision (which had reconsidered the independent contractor analysis under the NLRA as set forth in FedEx Home Delivery, 361 NLRB 610 (Sept. 30, 2014)). In FedEx, the Board said that entrepreneurial opportunity is a relevant factor, but that there must be evidence that alleged opportunity in fact resulted in a worker conducting independent business activities for it to weigh in favor of independent contractor status. Entrepreneurial activity was, under FedEx, a factor on equal footing with other considerations for determining whether someone is an employee or independent contractor.
Under The Atlanta Opera, the Board has returned to the more employee-friendly analysis for determining independent contractor or employee status. “Entrepreneurial opportunity” is, at least for now, no longer afforded extra weight in the assessment as compared to other factors, including the degree of control a company has over the worker’s work, whether the worker is engaged in a distinct operation or business, whether the work is usually done under the employer’s direction or without supervision, the skill required to perform the role, whether the company or worker supplies the tools of the trade and place of work, the duration of the company-worker relationship, how the worker is paid, whether the work is part of the company’s regular business, whether or not the parties believe they are creating an independent contractor relationship, and whether the evidence demonstrate that the worker is providing services as an independent business. The test tracks the common-law standard the Supreme Court has previously said is required for determining worker classification under the NLRA.
Entrepreneurial opportunity is no longer a “super factor.” As the Atlanta Opera Board stated, “[i]n the context of weighing all relevant, traditional common-law factors, including those identified in the Restatement, the Board also considers whether the evidence tends to show that the putative independent contractor is, in fact, rendering services as part of an independent business.” The Board continued that it “should give weight only to actual (not merely theoretical) entrepreneurial opportunity, and that it should necessarily evaluate the constraints imposed by a company on the individual’s ability to pursue this opportunity.” “[T]he Board will consider not only whether the putative contractor has a significant entrepreneurial opportunity, but also whether the putative contractor: (a) has a realistic ability to work for other companies; (b) has proprietary or ownership interest in their work; and (c) has control over important business decisions, such as the scheduling of performance; the hiring, selection, and assignment of employees; the purchase and use of equipment; and the commitment of capital.” The Board will also consider whether the company “has effectively imposed constraints on an individual’s ability to render services as part of an independent business.”
It is possible that the standard reverts to the SuperShuttle standard upon appeal (if there is one). And if not via appeal, workers and companies can probably expect the next Republican Board to change the assessment yet again. Unless and until that happens, however, Atlanta Opera governs the analysis of employee or independent contractor status.