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► Independent Contractor Vs. Employee: NLRB Reverses Ruling

When National Labor Relations Board (NLRB) members’ terms expire and new members are appointed by the sitting president, prior Board decisions are often reversed—even fairly recent ones. The current Board recently reversed a Trump-era ruling about whether individuals are independent contractors or employees entitled to the National Labor Relations Act’s (NLRA) protections and the right to unionize. Let’s take a closer look.

Trump-Era Standard

When determining whether individuals are employees or independent contractors, the Trump-era test relied on 10 common-law factors primarily focused on an employer’s level of control over an individual:

  • The extent of control the employer may exercise over the work;
     
  • Whether the individual is engaged in a distinct occupation or business;
     
  • The kind of occupation, with reference to whether the work is usually done under the employer’s direction or by a specialist without supervision;
     
  • The skill required in the particular occupation;
     
  • Whether the employer or the worker supplies the instrumentalities, tools, and place of work;
     
  • The length of time for which the person is employed;
     
  • The method of payment, whether by the time or by the job;
     
  • Whether the work is part of the employer’s regular business;
     
  • Whether the parties believe they’re creating the relation of employer and employee; and
     
  • Whether the principal is in business.
     

According to the Trump-era Board, over time and most notably in the Obama Board’s decision in FedEx II, the Board had shifted the emphasis from control to economic reality, focusing on whether individuals were actually “rendering services as part of an independent business” and making entrepreneurial opportunity merely one aspect of that factor.

Although the common-law factors provided the framework by which to make an independent contractor decision, when some factors favored a finding of independent contractor status and others favored employee status, the Board’s focus skewed toward whether the individual’s position presented the actual opportunity and risk inherent in entrepreneurialism.

According to the Trump Board, actual entrepreneurial opportunity had impermissibly developed into a principle the Board used to evaluate the overall significance of each of the common-law agency factors (i.e., common-law factors that supported a worker’s actual entrepreneurial opportunity indicated independent contractor status, whereas a lack of actual entrepreneurial opportunity indicated employee status).

In SuperShuttle DFW, Inc., the Trump Board overturned FedEx II, seeking to return the focus of the common-law factors to control as opposed to economic reality and an emphasis on actual entrepreneurial opportunity.

Biden Board’s Decision

On June 13, the Biden Board issued its decision in The Atlanta Opera, Inc., reversing SuperShuttle DFW, Inc. It kept the 10 factors from the common-law test, but its treatment of entrepreneurial opportunity differs significantly.

Under The Atlanta Opera, Inc., standard, entrepreneurial opportunity remains relevant, but according to the Board, it requires evidence that any alleged opportunity actually resulted in a worker’s conducting independent business activities for it to determine independent contractor status rather than employee status.

According to the Biden Board, determining “whether a putative contractor is, in fact, rendering services as part of an independent business . . . synthesizes the full constellation of considerations that the board has addressed under the rubric of entrepreneurialism.”

Takeaway

It remains to be seen whether this change in the analysis of the 10 common-law factors will result in more workers being deemed employees as opposed to independent contractors. Interestingly, a 2022 study found that under the Trump-era standard from SuperShuttle DFW, Inc., workers were often still found to be employees.

Thus, while more litigation is expected over the issue under a test that’s more likely to determine employee status versus independent contractor status, it’s unknown whether The Atlanta Opera, Inc., will result in findings of employee status any more frequently than under the SuperShuttle DFW, Inc., standard.

In addition, the U.S. Court of Appeals for the District of Columbia, an appellate court in which employers may appeal a Board decision, previously criticized the analysis the Board returns to in The Atlanta Opera, Inc. Commentators are mixed on how that court might view the issue and whether the standard set forth in The Atlanta Opera, Inc., will remain the standard for long.
 

By Martin J. Regimbal. Mr. Regimbal is a shareholder of The Kullman Firm in Columbus, Mississippi. Martin represents employers in labor and employment law matters and has litigated collective actions under the Fair Labor Standards Act, matters brought under Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act, and other federal and state statutes in a variety of courts.
 

[7/2023]

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