On June 13, 2023, the National Labor Relations Board (“NLRB”) again changed the standard for determining independent contractor status under the National Labor Relations Act (the “Act”), making it more difficult for employers to demonstrate that their workers are independent contractors. The NLRB’s Atlanta Opera, Inc. decision—which overturned the independent contractor standard adopted in 2019 SuperShuttle—returned to the 2014 FedEx Home Delivery standard that favors classifying workers as employees over independent contractors. This classification is important because the Act excludes an independent contractor from the definition of a “covered employee,” and only employees have the right to join a union, collectively bargain, and enjoy the Act’s workplace protections.
This reversal of the NLRB’s standard was not unexpected. NLRB members are appointed by the president for terms of only five years and, consequently, the Board’s decisions reflect and advance current presidential initiatives. As a result, Board reversals of prior decisions are not uncommon. This particular case delivers on one of many of President Biden’s explicit campaign promises to unions.
Under the prior SuperShuttle and FedEx Home Delivery tests, the NLRB used the common law factors of agency to determine independent contractor status. Under SuperShuttle, when an individual possessed “entrepreneurial opportunity,” it was presumed the employer exercised less control, which favored independent contractor status. When an individual possesses “entrepreneurial opportunity,” the individual functions as an independent business and experiences risk and reward challenges faced by a business owner. In returning to the FedEx Home Delivery standard, the NLRB noted it intended “that the Board 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.”
The FedEx Home Delivery standard looks at the common law factors which are aligned with Supreme Court precedent and still allows for individuals’ entrepreneurship to be an assessment factor. The NLRB explained that entrepreneurial opportunity would be taken into account, along with the traditional common law factors, by asking whether the evidence tends to show that a supposed independent contractor is, in fact, rendering services as part of an independent business. The common law factors include the following, with no one factor being dispositive:
- The extent of control, which by agreement, the employer may exercise over the details of the work.
- Whether or not the individual is engaged in a distinct occupation or business.
- Whether the work is usually done under the direction of the employer or by a specialist without supervision.
- The skill required in the particular occupation.
- Whether the employer or individual supplies instrumentalities, tools, and the place of work.
- The length of time for which the individual is employed.
- The method of payment.
- Whether or not the work is part of the regular business of the employer.
- Whether or not the parties believe they are creating an independent contractor relationship.
- Whether the principal is or is not in business.
- Whether the evidence tends to show that the individual is, in fact, rendering services as an independent business.
Employers who utilize independent contractors as part of their workforce should proceed with caution, knowing that their workers could potentially be deemed statutory employees with union rights, absent strict compliance with the reinstated independent contractor standard described here. Further, the NLRB’s General Counsel has previously shared her belief that misclassifying workers as independent contractors is a per se violation of the Act. It is highly advisable for employers to self-audit by applying the factors of the common law test to each independent contractor they utilize to determine if they would be deemed properly classified.
If you have any more questions regarding the classification of employees, please contact a member of the Barton Labor and Employment Team.
