The National Labor Relations Board ("NLRB") has modified its Independent Contractor Standard under the National Labor Relations Act ("NLRA"). It is now harder for an employer to classify an individual as an independent contractor under the NLRA.
BOARD RE-AFFIRMS PRIOR STANDARD
In its June 13, 2023 decision in The Atlanta Opera, Inc., the NLRB re-affirmed its 2014 FedEx Home Delivery ("FedEx II") standard for determining independent contractor status under the NLRA. It overruled its prior standard under SuperShuttle (2019) placing emphasis on "entrepreneurial opportunity." It also focused on whether there was an opportunity for profit or loss. Now, under the restated Fedex II standard, the entrepreneurial opportunity is just one of many factors to consider.
In applying the new standard, the Board found that the makeup artists, wig artists, and hairstylists who work at the Atlanta Opera are covered employees under the NLRA; not independent contractors.
FACTORS UNDER THE NEW STANDARD
Under The Atlanta Opera decision, the factors that determine whether a worker is an independent contractor or an employee include:
- The extent of control by the employer;
- Whether or not the worker is engaged in a distinct operation or business;
- Whether the work is usually done under the direction of the employer or by a specialist without supervision;
- The skill required in the occupation;
- Whether the employer or worker supplies the instrumentalities, tools, and place of work;
- The length of time for which the worker is employed;
- The method of payment;
- Whether the work is part of the regular business of the employer;
- The belief of the parties when forming the relationship;
- Whether the services provided are a part of the employer's business or independent of the business.
SIGNIFICANCE TO EMPLOYERS
The new, restated FedEx II standard makes it harder for employers to prove independent contractor status of workers. Because "entrepreneurial opportunity" is no longer the emphasis, the new standard will likely have a significant impact on gig employers. These gig employes include companies such as Lyft, Uber and other transportation network companies.
The NLRB decision, however, is limited to employee status under the NLRA. It does not apply to other laws in the United States. These laws include Title VII of the Civil Rights Act and the Fair Labor Standards Act. Or, state unemployment benefit laws, which use varying tests to determine independent contractor status.
The NLRB's new standard is consistent with the overall trend to narrow the types of employees who can be independent contractors. For employers, properly classifying workers is essential to avoiding potential lawsuits.
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