National Labor Relations Board Again Tightens Its Grip on Definition of Independent Contractor

By Michael Burns, courtesy of SBAM-approved partner ASE

The issue of employee versus independent contractor classification is being looked at by many courts and agencies. We have been waiting for the U.S. Department of Labor to issue its regulations on independent contractor status for some time. States, including Michigan, are introducing legislation to address what an independent contractor is, and just last week the National Labor Relations Board (NLRB) ruled on a case looking to establish a stricter definition of independent contractor.

Last week the NLRB, through its process of setting “rules” by case decisions, ruled in a case called The Atlanta Opera, Inc., which modified its test for determining independent contractor status under the National Labor Relations Act (NLRA). Why is the NLRB interested in this issue? Well one reason is if the independent contractor can be considered legally an employee of the contractor he is engaged in work for, the contractor then becomes the employer of the contractor and not a vendor. The contractor as an employer instead of a customer can be held responsible for unfair labor practices or the NLRB considering the contractor as an employer may require the employer/contractor to bargain with what were vendor-employees and are now employees of the contractor turned employer. Abracadabra. Make sense?

Like both federal and state courts, the NLRB uses a test(s) to determine if a worker that is an independent contractor may in fact be an employee. The tests for criteria the NLRB’s uses have varied over the years. In the case decision made last week, the NLRB returned to a previous test that had been in place in 2014 called FedEx Home Delivery (FedEx II). This overruled a case called SuperShuttle in place since (2019).

In its new decision, the NLRB determined again that the test would use a list of common law factors that the U.S. Supreme Court had instructed should be used. Also as instructed in previous NLRB cases and in the federal court, these common law tests use several criteria, and the NLRB can give certain criteria more weight or preference when judging employee or independent contractor status. The new NLRB decision puts less weight on a criterion that looks at whether the independent contractor had “entrepreneurial opportunity” for gain or loss from the work they provide.

In The Atlanta Opera, Inc. case, the issue was whether make-up artists, wig artists, and hairstylists that worked at the Atlanta Opera as independent contractors were actually employees and could then file an election petition to unionize. As independent contractors they would not have the right to organize because they would be excluded from protection under the NLRA as such. As employees they could organize and force The Atlanta Opera Inc. to bargain with them collectively over terms and conditions of employment.

In this decision the NLRB modified its interpretation of its independent contractor test to adopt criteria to look at independent contractor status more narrowly than under the previous test used. Using this modified test criteria it found the make-up, wig, and hairstyle artists were actually employees of The Atlanta Opera, Inc.

From the standpoint of the NLRB, their concern is whether an independent contractor, or a number of them, could organize together at a contractor’s workplace into a union. As an independent contractor they would not have this right under the NLRA. If they are considered an employee, they would. This differs from the Department of Labor that is focused on wage and hour and other employment law compliance concerns in their broader employment law world. It also differs from state courts concerns about independent contractor status that may look at whether state unemployment law or workers compensation law may apply between a worker and the entity they work for as an independent contractor versus an employee.

The NLRB’s move to a stricter test for independent contractor status is consistent with other current moves by regulatory agencies and state legislations to narrow the definition of independent contractor status – effectively decreasing independent contractors. We are waiting for new rules from another regulatory body, the U.S. Department of Labor, on what they consider an independent contractor is. This is expected to be released this October. Acting in the world outside of the NLRB’s purview, these rules are also expected to narrow what workers can be independent contractors and what workers must in fact be employees.

So, what does this new NLRB standard may mean?

Some say not a lot, but from the NLRB’s standpoint it allows that agency to act more favorably toward facilitation of labor organizing. A whole new set of workers and their employers are in the crosshairs of the NLRB for unfair labor practices when involved in organizing and in representation cases seeking elections to organize new unions.

Independent Contractors are at the heart of our free enterprise system. Single workers are where small business begins. Where regulatory agencies such as the NLRB and Department of Labor seek to narrow or re-define whether a worker is an employee or independent contractor, they are restricting small, independent business in their embryonic stage. They are also denying people that value their independence, the right to work for themselves and not be forced into the employment of another. This is at the heart of many independent contractors’ reasons for not being an employee. The freedom to work how one wants, when one wants, and with whom one wants.

The NLRB, as a regulatory agency under the “most pro-labor administration ever” is continuing to change the rules to force more workers away from working for themselves and into the employment of others and in turn to union membership.

Sources:
NLRB Press Release Board Modifies Independent Contractor Standard Under National Labor Relations Act. (6/13/2023)
Law 360 Employment Authority. The NLRB’s Atlanta Opera Contractor Shift Won’t be That Dramatic. (6/14/2023)