NLRB Overturns Standard for Independent Contractor Status Under the NLRA
On June 13, 2023, the National Labor Relations Board (the “Board” or “NLRB”) overturned another business-friendly Board decision in favor of a return to a more employee-favorable standard for determining if a worker is an employee or an independent contractor under the National Labor Relations Act (“NLRA”). Independent contractors are exempt from the rights and protections of the NLRA, including the right to form and join unions.
The Board’s decision in The Atlanta Opera, Inc. and Make Up Artists and Hair Stylists Union, Local 798, IATSE, 372 NLRB No. 95 (June 13, 2023) (decision here) overturned the 2019 decision in SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019) and reinstated the Board’s prior standard from the decision in FedEx Home Delivery, 361 NLRB 610 (2014) (FedEx II).
By reinstating the FedEx II standard, the Board emphasized that the analysis as to whether a worker was an independent contractor or employee would still be guided by the common-law factors from the Restatement (Second) of Agency, Section 220, but also that “all incidents of the relationship must be assessed and weighed with no one factor being decisive.” This is in stark contrast to the SuperShuttle standard, where the Board focused on a worker’s “entrepreneurial opportunity” as an animating principle to determine independent contractor status, instead of equally evaluating all of the common-law factors.
In The Atlanta Opera, the Make Up Artists and Hair Stylists Union, affiliated with IATSEhadfiled a petition to represent the makeup artists, wig artists, and hairstylists (collectively the “stylists”) who worked with the Atlanta Opera on its productions. The employer, the Atlanta Opera asserted that the stylists were independent contractors and therefore not covered by the NLRA.
On June 17, 2021, the Acting Regional Director issued a Decision and Direction of Election finding that the stylists were statutory employees under the Act. The employer filed a request for review of the Acting Regional Director’s Decision and Direction of Election, which was granted by the Board.
The Board utilized the employer’s request for review of the Acting Regional Director’s Decision and Direction of Election as an opportunity to potentially overrule SuperShuttle and invited briefing in order to determine the following:
- Should the Board adhere to the independent contractor standard in SuperShuttle?
- If not, what standard should replace it? Should the Board return to the standard in FedEx II, either in its entirety or with modifications?
The Board ultimately overruled SuperShuttle, and reinstated the standard and approach from its prior decision in FedEx II. Both decisions utilize the same common law factors, but differ in their approach to assessing how “entrepreneurial opportunity” of the workers affects the overall analysis of the common law factors.
The Board determined that SuperShuttle could not be reconciled with common-law agency principles, or Supreme Court or Board precedent, reasoning that none had elevated or viewed “entrepreneurial opportunity” as a super factor to guide the analysis of the overall effect of the common law factors.
The Board instead reinstated the standard that when evaluating independent contractor status, the Board will be guided by the nonexhaustive common-law factors enumerated in the Restatement (Second) of Agency, Section 220 and will assess “all of the incidents of the relationship” with “no one favor being decisive.”
The Board also explained that the proper use of “entrepreneurial opportunity” in the analysis is to view, in the context of weighing all relevant, traditional common law factors, whether the evidence tends to show that the putative independent contractor is, in fact, rendering services as part of an independent business and that the Board will only give weight to actual, and not theoretical or potential entrepreneurial opportunity.
With respect to the stylists at issue, the Board concluded that a majority of the common law factors pointed toward employee status, including:
- The extent of control by employer – In The Atlanta Opera, the director of the production controlled the details of the stylists work;
- Whether the work is usually done under the direction of the employer or by a specialist without supervision – In The Atlanta Opera, the director of the production gave continuous feedback to the stylists on their work;
- Whether the employer or individual supplies instrumentalities, tools, and place of work – In The Atlanta Opera, the employer supplied all instrumentalities, tools and places of work;
- Method of payment – In The Atlanta Opera, stylists were paid at an hourly rate with a fixed number of hours and the employer could unilaterally determine if overtime was necessary;
- Whether or not work is part of the regular business of the employer – In The Atlanta Opera, the work of the stylists was an integral part of the employer’s business of putting on the opera productions for patrons; and
- Whether or not principal is or is not in business – In The Atlanta Opera, the employer is in business.
Although three factors – distinct occupation, skill, and length of employment – all weighed in favor of independent contractor status, they did not outweigh the factors that favored employee status. Lastly, the Board considered whether the evidence demonstrated that the stylists rendered services to the employer as part of their own independent business and determined that it did not as the stylists did not have a proprietary interest in their work, they could not assign their positions, or hire replacements, the employer made all business decisions and during productions, there was no opportunity for a stylist to employ entrepreneurial strategies that could result in more income.
Key Takeaways
In another shift back to more employee and union friendly standards, it is likely that more workers will now fit the classification of employee instead of independent contractor for purposes of the NLRA. As Chairman McFerran stated in the majority opinion of The Atlanta Opera, one of the intentions of returning to FedEx II is to prevent broader exclusion from the NLRA’s statutory coverage than Congress intended. Thus, it will be imperative for employers to review any current agreements and working arrangements they may have with contractors and to be aware of any new future working arrangements with contractors.
