Reversing Course … Again  

The National Labor Relations Board Counters Precedent with New Ruling on Classification of Independent Contractors

In 2019, the National Labor Relations Board issued its decision in the SuperShuttle DFW, Inc. case, emphasizing the importance of entrepreneurial opportunity in applying the traditional multi-factor test to determine whether workers should be classified as employees or independent contractors.

That decision reversed the precedent, favoring classification as employees and, therefore, unionization. Over the summer, the NLRB once again reversed course, demonstrating a clear preference of the current administration toward potential unionization. 

In a separate case, makeup artists, wig artists, and hair stylists at the Atlanta Opera filed an election petition with the NLRB seeking union representation. Knowing that the National Labor Relations Act only provides rights to employees, the Atlanta Opera argued that the claimants were independent contractors rather than employees and could not seek union representation.

The NLRB held that the traditional multi-factor test must be applied and that entrepreneurship would no longer be viewed as an “animating principle.” Instead, the Board will evaluate whether workers are correctly classified as independent contractors in light of the traditional common law principles, with no one factor being decisive. The 10 factors the NLRB will consider when determining whether workers are independent contractors or employees entitled to the protections afforded under the NLRA are as follows:

• The extent of control which, by the agreement, the master may exercise the details over the work
• Whether or not the one employed is engaged in a distinct occupation or business
• The kind of occupation, regarding 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

The Atlanta Opera decision from the NLRB acknowledged that evidence of an entrepreneurial opportunity remains part of the analysis, focusing on whether the worker is operating an independent business. The NLRB’s decision noted that factors to be considered when determining entrepreneurial opportunity include the following:

• Whether the worker has a realistic ability to work for other companies
• Whether the worker has a proprietary or ownership interest in their work
• Whether the worker 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.

In the Atlanta Opera case, based on considering all the factors provided above, the NLRB determined that the stylists were employees and not independent contractors and therefore had the right to unionize.

This decision continues the pattern of NLRB decisions adhering to the political preferences of the particular administration in power. Note, however, that NLRB decisions are subject to appeal. The D.C. Circuit, which has jurisdiction over NLRB decisions, has previously ruled against the standard applied in this case on more than one occasion, as it favors the emphasis on entrepreneurial opportunity used in the SuperShuttle case. 

Note also that the dissent in the Atlanta Opera case argued that there was no need to overturn the SuperShuttle standard because the facts were such that the Atlanta Opera workers would be found to be employees even under that standard. 

We expect litigation on these issues to continue. 

In the meantime, employers need to be aware of the standards now being applied, especially in light of the emphasis by the Board and its general counsel. Attention should be paid to whether workers are correctly classified as independent contractors, and adjustments should be made where necessary. 

As we noted in our update in 2019 when the SuperShuttle case was announced, these decisions do not necessarily impact the U.S. Department of Labor and income tax issues related to worker classification; the Atlanta Opera decision does indicate the emphasis of the administration in general, which is clearly in favor of union employees and against employers’ business interests.