Independent contractors are excluded from the National Labor Relations Act’s (“NLRA”) protections, which include the right of covered employees to form and join labor unions and engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. On June 13, 2023, the National Labor Relations Board (“NLRB”) issued its decision in The Atlanta Opera, Inc., 372 N.L.R.B. No. 95, overturning the 2019 Trump-era NLRB precedent used to evaluate independent contractor status. With its Atlanta Opera decision, the NLRB has returned to an independent contractor test where all ten common law factors will guide its inquiry, along with entrepreneurial opportunity, with no one factor being decisive. In 2014, the Obama-era NLRB, in FedEx II, reaffirmed its commitment to the non-exhaustive common law factors enumerated in the Restatement (Second) of Agency, for purposes of evaluating independent contractor status.
These common law factors include:
(a) the extent of control which, by the agreement, the master may exercise over the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or business;
(c) 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;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h) whether or not the work is a part of the regular business of the employer;
(i) whether or not the parties believe they are creating the relation of master and servant; and
(j) whether the principal is or is not in business.
In FedEx II, the NLRB explained that “entrepreneurial opportunity” should also be considered in its independent contractor analysis, but emphasized that it represents just “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,” which itself is one among other relevant factors that all must be assessed and weighed when evaluating independent contractor status with no one factor being decisive. Further, the NLRB discussed that it “would only give weight to actual, but 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.” This decision made a worker’s entrepreneurial opportunities much less significant in the independent contractor analysis and made it more difficult for businesses to classify workers as independent contractors.
In SuperShuttle DFW, Inc., the 2019 Trump-era NLRB vehemently disagreed with FedEx II and held that “entrepreneurial opportunity” for gain or loss should be given special weight and prominent consideration when compared to the other common law factors. It went on to say that entrepreneurial opportunity should constitute the “animating principle” by which to evaluate the common law factors.
In Atlanta Opera, the NLRB held that makeup artists, hairstylists, and wig stylists were not independent contractors, but rather employees of an opera house entitled to protections under the NLRA. In doing so, the NLRB expressly rejected the SuperShuttle DFW, Inc. independent contractor test and reinstated the FedEx II standard, in which all common law factors are analyzed and no single factor is decisive. The NLRB reiterated that it will still consider evidence of entrepreneurial opportunity, but again emphasized that only actual and not merely theoretical entrepreneurial opportunity should be considered. Further, the NLRB said it will consider whether the “putative contractor has a realistic ability to work for other companies, proprietary or ownership interest in their work, and has control over important business decisions.” The Atlanta Opera decision will make it easier for workers labeled as independent contractors to demonstrate that they are in fact employees with rights under the NLRA.
Atlanta Opera only addresses classification of workers as independent contractors under the NLRA, and, significantly, there are many other federal and state laws with their own independent contractor tests. For example, in October 2022 the Department of Labor (“DOL”) issued a proposed rule to clarify who is an independent contractor under the Fair Labor Standards Act. The DOL anticipates that it will publish the final version of this rule in August 2023. Given the number of federal and state laws that protect employees, and the fact that these laws are constantly changing and being reinterpreted, whether an individual is properly classified as an independent contractor is a common but very complex issue. Thus, employers should always seek guidance from counsel when analyzing if their workers are properly classified and in preparing or revising independent contractor and employment agreements and related policies to minimize the risk of misclassification. Finally, employers should bear in mind that although most employment laws protect employees but not independent contractors, there are some laws that protect both classifications of workers.
