On Monday, December 27, 2021, the National Labor Relations Board (the "Board" or the "NLRB") issued a notice of proposed rulemaking and invited public participation in reconsidering the test for classifying independent contractors under the National Labor Relations Act ("NLRA"). Transitions between presidential administrations have led to much back and forth in characterizing the test for independent contractors. The Board, a majority of whom are nominees of Presidents Obama or Biden, will consider whether it will disregard the Trump era decision, SuperShuttle v. Amalgamated Transit Union Local No. 1338, and return to the standard set forth in FedEx Home Delivery v. International Brotherhood of Teamsters, Local Union No. 671 established in the Obama Administration.
FedEx: The Delivery of a More Stringent Independent Contractor Standard
In 2014, the NLRB considered the question of whether owner-operators who drive for FedEx are independent contractors or employees under the NLRA. The board analyzed the question under what is known as the "common law" test. The common law test employs 10 factors to determine whether a worker is an independent contractor or an employee worthy of protection under the NLRA. Those factors are:
- the extent of control the employer has over the worker;
- whether the worker is engaged in a distinct job or business;
- the kind of job the worker has, with reference to whether the work is usually done under the direction of the employer or by an unsupervised specialist;
- the skill required in the particular job;
- whether the instrumentalities, tools, and place of work are provided by the employer or the worker;
- the length of time the person works for the employer;
- the method of payment;
- whether the work is part of the employer's regular business;
- whether the parties believe they are creating a master and servant relationship; and
- whether the principal is in the business.
The extent of an employer's control over an individual's work is the primary factor in the analysis. Traditionally, the purpose of the common law factors was to differentiate an employee—one who is typically controlled by an employer—from independent contractors—one who exhibits entrepreneurial freedom by running an independent business subject to its own unique gains and losses. The FedEx board, however, felt the traditional application placed too much emphasis on the indicia of entrepreneurship.
A majority of the Board found the drivers were employees and thus entitled to the federal protections of the NLRA. The Board held that in future cases it could only analyze facts dealing with a worker's ability to be entrepreneurial within the single factor addressing whether the worker is engaged in a distinct job or business. The Board's decision effectively diminished a worker's independent entrepreneurial activities in determining his/her employment status.
Rather than assessing each factor through a lens of entrepreneurial independence, the board diluted the significance of entrepreneurial activity into a single, non-conclusive factor. The board reasoned it was merely clarifying the standard. Critics, however, claim the board went further than mere clarification by impermissibly diminishing an important factor in distinguishing independent contractors from employees.
SuperShuttle: Departure from the FedEx Factors
In 2019, the Board, at that time consisting of a majority of Trump appointees, reversed the FedEx decision. In line with FedEx's critics, the board reasoned FedEx impermissibly altered the common law test for characterizing independent contractors and employees. Instead, SuperShuttle embraced the 1968 Supreme Court decision in NLRB v. United Insurance Co. of America and the Restatement (Second) of Agency.
The Board found that FedEx improperly devalued entrepreneurial opportunities when it limited entrepreneurial facts to apply to merely one factor. FedEx Home Delivery, 361 NLRB at 610 (2014), enf. denied 849 F.3d 1123. The SuperShuttle board found that entrepreneurial opportunities are an independent factor in a "non-exhaustive" list to be "weighed with no one factor being decisive." SuperShuttle DFW, Inc. 367 N.L.R.B. No. 75 (Jan. 25, 2019). The new test was a return to the pre-FedEx rule directing fact finders to consider a worker an independent contractor where the worker's conduct closely resembles an independent business, stating "Where a qualitative evaluation of common-law factors shows significant opportunity for economic gain (and, concomitantly, significant risk of loss), the board is likely to find an independent contractor." SuperShuttle, 367 N.L.R.B. at 17. In other words, fact finders will determine whether all factors, taken as a whole, more closely reflect entrepreneurial opportunity that comes with running an independent business or resemble an employee subject to a certain degree of control from his or her employer. The approach in SuperShuttle created a more stringent test for workers seeking status as an employee.
Atlanta Opera: Queue the Music for More Litigation
To the fatigue of many courts, litigants, and corporations alike, the Board recently announced it would revisit both FedEx and SuperShuttle. In Atlanta Opera v. Make-Up Artists and Hairstylists Union, Local 798, the Board will examine whether makeup artists and hairstylists working for the opera are either independent contractors or employees. The Board invited briefing on the following questions:
- Should the Board adhere to the rule in SuperShuttle?
- If not, what standard should replace it? Should the Board return to the standard in FedEx, either in its entirety or with modifications?
The Board is likely to reinstate its prior Obama era decision from FedEx. Reinstatement of the FedEx rule may have a great impact on a variety of industries such as franchisors that classify their franchisees as independent contractors. The question of independent contractor status remains a heavily fact-based inquiry. A return to the FedEx approach will open the door possibly to more employee misclassification claims, unionization, and greater protection for workers under the NLRA.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.