On June 13, 2023, the National Labor Relations Board (NLRB) overruled the Trump-era decision that “entrepreneurial opportunity” is the animating principle of the test to determine whether a worker is an employee or independent contractor under the National Labor Relations Act (NLRA). In doing so, the NLRB restored the common-law “totality of the circumstances” test.
In its recent ruling in The Atlanta Opera, Inc., the NLRB struck down its 2019 decision in SuperShuttle DFW, Inc. and reaffirmed its 2014 decision in FedEx Home Delivery (known as FedEx II).
In FedEx II, the NLRB held that, in accordance with its longstanding principles and U.S. Supreme Court guidance, it would use a nonexhaustive list of common-law factors enumerated in the Restatement (Second) of Agency, Section 220 (1958) to distinguish employees from independent contractors and assess all of the factors without finding any one factor to be decisive.
Five years later, in SuperShuttle, the NLRB held that a worker’s entrepreneurial opportunity should be the animating principle in the inquiry, with a greater opportunity rendering independent contractor status more likely. The NLRB stated it would “evaluate the common-law factors through the prism of entrepreneurial opportunity when the specific factual circumstances of the case make such an evaluation appropriate.”
Atlanta Opera Decision
In Atlanta Opera, the NLRB rejected the SuperShuttle decision and reaffirmed FedEx II. The NLRB reiterated that employment status should be determined by assessing the following list of nonexhaustive factors:
Rather than have any animating principle, the NLRB stated that “all of the incidents of the [employment] relationship must be assessed and weighed with no one factor being decisive.”
To the extent that the assessment includes “entrepreneurial opportunity,” the NLRB stated that it should be in the context of weighing all of the relevant, traditional common-law factors and “whether the evidence tends to show that the putative independent contractor is, in fact, rendering services as part of an independent business.” In evaluating whether a putative independent contractor performs services on behalf of an independent business, the NLRB will not only consider the common-law factors and whether the person has significant entrepreneurial opportunity, but also whether the putative contractor:
The NLRB will also consider evidence that the employer has imposed constraints on a worker’s ability to render services as part of an independent business. Such evidence includes:
Pursuant to this inquiry, the NLRB “will consider whether the terms or conditions under which the individuals operate are promulgated and changed unilaterally by the company.” Further, the NLRB stated that entrepreneurial opportunity should only be given weight for actual (not merely theoretical) entrepreneurial opportunity. Entrepreneurial opportunities that workers cannot realistically take will not be considered in the analysis.
This is a totality of the circumstances test, and outcomes will be evaluated on a case-by-case basis. The burden of proof is on the party asserting independent contractor status.
This decision will very likely be appealed to the U.S. Court of Appeals for the District of Columbia Circuit. Although the appellate court has previously rejected the Fedex II standard, some observers think that this go-around could be different, and the court will uphold Atlanta Opera. In light of the Atlanta Opera decision, companies should know that:
If you have any questions or want more information about the recent NLRB decision, please contact a member of Gould & Ratner’s Human Resources and Employment Law Practice.