The National Labor Relations Board, in its decision in The Atlanta Opera, Inc., has modified its standard for determining whether a worker is an employee or independent contractor under the National Labor Relations Act (the Act). This ruling, handed down on June 13, 2023, makes it more difficult for individuals, including gig economy workers, to maintain independent contractor status.

It is an important issue because independent contractors are expressly excluded from protections under federal labor law. Contractors are not legally entitled to join or form unions, engage in other protected activity,or seek protection from discrimination based on union affiliation or activity.

For context, the issue of independent contractor status has been in flux over the past decade. In 2014, the NLRB issued a decision in FedEx Home Delivery, 361 NLRB 610 (2014) (FedEx II) that, like Atlanta Opera, loosened the standard for independent contractor status to include more individuals as “employees” under the Act. Following a reversal of FedEx II by the D.C. Circuit Court of Appeals, the Board issued another decision in 2019 overruling FedEx II, called SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019). For those keeping score, the Atlanta Opera decision basically restores Fed Ex II as the governing standard.

To understand what changed, it is helpful to review the “old” standard. Expressed in SuperShuttle DFW, Inc., the “old” standardhighlighted the factor of entrepreneurial opportunity as “the overriding consideration in all but the clearest cases” and as the “single animating principle” of the independent contractor test. This entrepreneurial opportunity test looks at whether an individual stands to make a profit or loss based on his or her own efforts at work. Following this factor, the more independence an individual has as an entrepreneur, the more likely it will be that the individual will be properly classified as an independent contractor, excluded from coverage under the Act.

By contrast, the Atlanta Opera standard holds that when analyzing whether a worker is an employee covered by federal labor law or an independent contractor who is not covered, all of the incidents of the relationship must be assessed and weighed, with no one of the ten common law factors being decisive. The entrepreneurial opportunity factor is no longer given any special weight in the review by the Board.

Specific to the facts of the case, the Board in Atlanta Opera found that the workers at issue — the makeup artists, wig artists and hairstylists working at The Atlanta Opera — are not independent contractors, but rather are employees. Interestingly, in dissent, Board Member Kaplan concluded that the individuals should be treated as employees, not contractors, under the “old” standard expressed in SuperShuttle. Accordingly, in his view, there was no need to revisit the applicable legal standard in this case.

The NLRB decision is subject to an appeal and may be vacated in the future by an appeals court. Given the previous appellate rejection of the FedEx II standard by the D.C. Circuit, this new decision may not survive if brought to that same appellate court. However, there may not be an appeal in this case because all participating Board members concluded that the individuals were employees, they just differed on the proper test to use in reaching that conclusion.

The decision is particularly significant for gig economy companies, and other businesses that rely on independent contractors, as it opens the door to federal labor law protections for workers who are traditionally not protected and can incentivize these workers to seek union representation. This could potentially force companies to recognize and negotiate with unions.

Given the uncertainties of this recent decision, employers should consider its impact when classifying workers as independent contractors and assessing potential labor costs associated with same. Moreover, the ruling is only applicable to worker classification issues under the National Labor Relations Act. This decision does not affect other laws governing employees.

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