Earlier this week, the National Labor Relations Board (NLRB) issued a decision in The Atlanta Opera, Inc., 372 NLRB No. 95 (2023), modifying its approach for assessing whether workers are employees covered by the National Labor Relations Act (NLRA) or, instead, are independent contractors excluded from coverage.
The case is important because it may lead to more employee misclassification claims, unionization, and greater protection for workers under the NLRA.
Background
Section 2(3) of the NLRA excludes independent contractors from statutory coverage. In 2014, the Board in FedEx Home Delivery, 361 NLRB 610 (FedEx II) “reaffirmed [its] longstanding commitment” to the “nonexhaustive common-law factors enumerated in the Restatement (Second) of Agency” for determining independent contractor status. These factors include:
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- The extent of control which, by the agreement, the master may exercise over the details of the work.
- Whether or not the one employed is engaged in a distinct occupation or business.
- The kind of occupation, with reference to whether, in the locality, 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 the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
- The length of time for which the person is employed.
- The method of payment, whether by the time or by the job.
- Whether or not the work is a 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.
In FedEx II, the Board further explained it has historically considered whether putative contractors have a “significant entrepreneurial opportunity for gain or loss.” Related to this question, the Board assessed whether the putative contractors had the ability to work for other companies, could hire their own employees, and had a proprietary interest in their work. The Board weighed these considerations alongside the Restatement’s factors, but “without assigning them any special significance or weight.” “Entrepreneurial opportunity,” the Board held, “represents one aspect of a relevant factor that asks whether the evidence tends to show that the putative contractor is, in fact, rendering services as part of an independent business.”
In 2019, the Board in SuperShuttle DFW, Inc., 367 NLRB No. 75, overruled FedEx II and held that “entrepreneurial opportunity” is the “principle by which to evaluate the overall effect of the common-law factors on a putative contractor’s independence to pursue economic gain.” The Board explained that FedEx II did not give proper consideration to the significance of a worker’s “entrepreneurial opportunity for gain or loss.” Thus, under the Board’s SuperShuttle standard, all common-law factors were evaluated “through the prism of entrepreneurial opportunity.”
For example, in SuperShuttle, the Board found that drivers of airport shuttle vehicles were independent contractors because they had significant opportunity for economic gain due to their autonomy in setting their work schedules, their discretion to own or lease vans, and other decisions that impacted the amount of revenue they took in.
NLRB Overrules SuperShuttle and Returns to Approach Outlined in FedEx II
In The Atlanta Opera, Inc., the NLRB overturned its SuperShuttle decision, in which the Board had held that a worker’s entrepreneurial opportunity for gain or loss should be the “animating principle” of the independent-contractor test. Instead, the Board returned to its approach outlined in FedEx II, under which a number of common law factors are analyzed to determine whether a worker is an independent contractor or an employee.
The Board in The Atlanta Opera explained that a worker’s entrepreneurial opportunity would still be considered. However, the Board stated that only “actual (not merely theoretical) entrepreneurial opportunity” should be given weight, and it is necessary to “evaluate the constraints imposed by a company on the individual’s ability to pursue this opportunity.” Thus, “if a company offers its workers entrepreneurial opportunities that they cannot realistically take, then that does not add any weight to the company’s claim that the workers are independent contractors.” The Board stated it 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. This factor synthesizes the full constellation of considerations that the Board has addressed under the rubric of entrepreneurialism. At the same time, the Board will continue to give full consideration and appropriate weight to all of the traditional common-law factors. As with all other relevant factors, the weight given to whether a putative contractor renders services as part of an independent contract business will depend upon the factual circumstances of the particular case.
Finally, the Board held that it will apply its holding retroactively to all pending cases.
Bottom Line
In overturning its decision in SuperShuttle and returning to the standard outlined in FedEx II, the Board opens the door to more workers being classified as employees and falling within the NLRA’s coverage. Accordingly, Employers should consult with their trusted Felhaber labor counsel and reevaluate whether their workers truly constitute independent contractors.
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