NLRB Decision: New Standard for Independent Contractors

On June 13, 2023, the National Labor Relations Board (“NLRB” or “Board”) reverted to its prior employee friendly independent contractor test to find that makeup artists, wig artists, and hairstylists (“the stylists”) working for the Atlanta Opera were employees rather than independent contractors.  This revived independent contractor test will significantly impact employers who will now face a higher bar when seeking to classify workers as independent contractors excluded from the protections of federal labor laws.

The Discarded SuperShuttle Standard:  Since 2014 the NLRB applied the following non-exhaustive list of factors to determine independent contractor status:

  • The extent of control the employer exercises over the work
  • Whether the worker is engaged in a distinct occupation or business
  • Whether the work is done under the direction of the employer without supervision
  • The skills required for the occupation
  • Who supplies the instrumentalities, tools, and place of work
  • The length of time the worker is engaged
  • Whether the worker is paid by time or by job
  • Whether or not the work is a part of the regular business of the employer
  • Whether the parties believe there is an employer-employee relationship

Generally, these factors were considered equally, with no factor being given more weight than another.

However, under the NLRB’s Trump Era ruling in SuperShuttle DWF, Inc., the Board modified the test, reasoning that entrepreneurial opportunity for economic gain or loss was an “animating principle” to be applied to all factors of the independent contractor analysis.  Under the SuperShuttle approach, special weight was given to entrepreneurial opportunity by evaluating all factors based on the effect each factor had on a worker’s independence to pursue economic gain.  This revised standard made it easier for workers in the gig economy to be classified as independent contractors.

The “New” Atlanta Opera Standard:

In the Atlanta Opera decision, the NLRB dispensed with the SuperShuttle test’s focus on entrepreneurial opportunity as a decisive factor in the independent contractor analysis.  Rather, the Board reverted to its prior standard which requires all factors be considered in light of the factual circumstances, with no one factor given more weight than another.  Further, when considering a worker’s entrepreneurial opportunity, the NLRB will only consider actual opportunities, not theoretical opportunities.

Applying this new standard in Atlanta Opera, the Board found that the stylists were employees, despite the fact that they were engaged in a distinct business, had specialized skills, and worked on a project basis rather than for an indefinite time period generally associated with an employer-employee relationship.  The Board also found that the stylists’ entrepreneurial opportunity was merely theoretical because there was no other opera in town that could engage the stylists to work.

Effect on Employers:

The factors that the NLRB considers when determining whether a worker is an independent contractor have not changed.  However, in reverting back to the more “employee-friendly” approach that considers entrepreneurial opportunity as only one factor may impact employers who heavily relied on this factor to establish independent contractor status in the current gig economy.

Employers must be mindful of this change in the NLRB’s approach when hiring new workers and continuing to classify workers as independent contractors who cannot meet the requirements of the new standard.

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