NLRB’s Flips on Independent Contractor…Again
On June 13, 2023, the National Labor Relations Board (NLRB) issued its decision in The Atlanta Opera, Inc., 372 NLRB No. 95, which overturned the existing legal standard for determining whether a worker is an employee covered by the National Labor Relations Act (the Act) or an independent contractor. In a 3-1 decision, the Board restored a more employee-friendly analysis, making it easier for workers to be considered employees and consequently entitled to coverage under the Act.
Decision in Atlanta Opera
In Atlanta Opera, the NLRB evaluated whether makeup artists, wig artists, and hairstylists working at the opera company were independent contractors or employees. In finding the workers to be employees, the NLRB reverted to the two-part analysis set forth in FedEx Home Delivery, 361 NLRB 610 (2014), which the D.C. Circuit refused to enforce (849 F.3d 1123, D.C. Cir. 2017). First, the NLRB will assess the following common-law agency factors, with no one factor being decisive:
- The extent of control which, by agreement, the employer may exercise over the details of the work.
- Whether or not the worker is engaged in a distinct occupation or business.
- The kind of occupation, with reference to whether, in the locality, the work is usually performed under the direction of the employer or by a specialist without supervision.
- The skill required in the particular occupation.
- Whether the employer or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work.
- The length of time for which the person is engaged.
- The method of payment – whether by time basis or by the job.
- Whether or not the work is part of the regular business of the employer.
- Whether or not the parties believe they are creating the relation of master and servant.
- Whether the principal is or is not in business.
Second, the NLRB will now give weight only to actual (not merely theoretical) “entrepreneurial opportunity” when assessing whether a worker is rendering services as part of an independent business. Accordingly, the Board will consider whether the worker:
- Has a realistic ability to work for other companies;
- Has a proprietary or ownership interest in their work; and
- 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.
Prior to Atlanta Opera, the Trump NLRB issued SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019), which adopted the D.C. Circuit’s analysis for determining whether a worker is an employee or independent contractor by giving elevated status to “entrepreneurial opportunity,” whether actual or potential, when evaluating the factors of the common-law agency test. The “entrepreneurial opportunity” factor under SuperShuttle looks at whether the worker has the actual or the potential to make a profit or loss based on their own efforts at work. Under SuperShuttle, the more independence a worker has in the working relationship with an employer, the more likely the worker is an independent contractor because of the greater potential for “entrepreneurial opportunity.” SuperShuttle overturned the Obama NLRB’s decision in FedEx Home Delivery, which maintained that the “entrepreneurial opportunity” consideration was significant only if the worker actually, not just theoretically, exercised it, acknowledging “entrepreneurial opportunity” is merely one factor within the traditional test.
Under Atlanta Opera, SuperShuttle is now overruled, and the standard of FedEx Home Delivery is restored, even though the D.C. Circuit previously rejected that Obama-era standard. Accordingly, it seems highly likely that this issue will end up before the Court of Appeals once again. In the meantime, the current standard of Atlanta Opera requires the analysis of several factors to demonstrate employee status and ceases making “entrepreneurial opportunity” a controlling factor, making it easier for a worker to be found to be an employee rather than an independent contractor.
Additionally, employers should be aware of NLRB General Counsel Jennifer Abruzzo’s agenda to ask the NLRB to overturn its Trump-era decision in Velox Express, Inc., 368 NLRB No. 61 (2019), where the NLRB found that a misclassification of an employee as an independent contractor is not a standalone violation of the Act.
With these ongoing developments at the NLRB, particularly the newly articulated Atlanta Opera standard, employers should be mindful of their judgments in classifying workers as independent contractors. Employers should not ignore the legal and financial risks associated with misclassification.
If you have questions about Independent Contractors or the recent NLRB decision, contact us for a consultation.