On Tuesday, June 13, 2023, the National Labor Relations Board (NLRB or the “Board”) issued a decision that effectively increases the number of workers who are considered employees rather than independent contractors under the National Labor Relations Act (NLRA). The decision, The Atlanta Opera, Inc. and Make-Up Artists and Hair Stylists Union, Local 798, IATSE overturns an existing Trump-era standard, and is yet another step by the current NLRB to expand the agency’s influence among workers.

Background

The NLRA defines “employee” to specifically exclude independent contractors; this means that independent contractors are not able to unionize under the NLRA and lack other employee protections provided by the law. Under the Trump administration, the NLRB elevated the role of “entrepreneurial opportunity” in its analysis of independent contractor status, and in doing so effectively narrowed the class of workers eligible for the NLRA’s protections. Under the Trump-era analysis, if a worker had an opportunity for economic gain or loss through their work, they were much more likely to be an independent contractor rather than an employee. This development was particularly welcomed by “gig economy” employers.

The Atlanta Opera Decision

At the time of this decision, The Atlanta Opera employed 32 full-time staff members and 16 seasonal employees, including musical artists. In addition, for each production, the director selected and temporarily engaged a group of hair, wig, and makeup artists (“Stylists”). The Stylists for each production were classified as independent contractors. Around April 2021, the Make-up Artists and Hair Stylists Union, Local 798, IATSE attempted to unionize the Stylists. The Atlanta Opera asserted that the Stylists could not be unionized because they were independent contractors not covered by the NLRA.

The Board found that the Stylists are statutory employees. Of particular note, the Board found that the Stylists have little to no flexibility in where and when they work; the Opera supplies their equipment and tools; the Stylists render work in furtherance of the Opera’s primary business (and not their own); and the Stylists do not enjoy entrepreneurial opportunity by working for the Opera. Viewing these circumstances on the whole, rather than through the lens of the entrepreneurial opportunity factor, the Board determined that the majority of the traditional common law factors lean toward the Stylists having employee status with the right to unionize.

In this case, and moving forward, the Board will consider all aspects of the worker-business relationship, with no one factor being more important or determinative. Those factors include:

• The extent of control exercised by the employer over the workers
• Whether the workers are engaged in a distinct occupation
• Whether the workers’ services were usually performed under the direction of the employer or without a supervisor
• The skills required for the occupation
• Whether the employer provides the workers with their supplies or tools, and the place where the work is performed
• The length of time that the workers work for the employer
• The method of payment to the workers
• Whether the workers’ work is part of the employer’s regular business
• Whether the parties believed they were creating an independent contractor relationship
• Whether the workers provide a key element of the employer’s business and
• Whether the worker is rendering services as an independent business, including whether they have “entrepreneurial opportunity,” have the ability to work for other companies, have ownership interest in their work, and have control over business decisions

The Atlanta Opera decision, like many of the NLRB’s recent decisions, brings back the Board’s more worker-friendly Obama-era stance. Under this standard, entrepreneurial opportunity will be considered equally in conjunction with the traditional common-law factors, as determined by examination of whether the purported independent contractor is rendering services as part of an independent business. The Board also determined that weight should be given only to actual—not theoretical—entrepreneurial opportunity, and, moving forward, the Board will evaluate the limits imposed by a business on the individual worker’s ability to pursue actual entrepreneurial opportunity.

What Does The Atlanta Opera Decision Mean for Employers?

Based on this decision, employers can anticipate blurring of worker classifications. This is likely to lead to an increase in attempted or actual unionization and greater protections for workers under the NLRA. For example, this decision expands the group of workers who are subject to the NLRB’s recent decision disapproving of employee confidentiality and non-disparagement provisions. In addition to providing employee protections to a larger group of workers, this broader standard will likely encourage additional litigation as companies and workers seek to clarify how this test will be applied.

Importantly, The Atlanta Opera decision does not impact courts or other agencies’ determinations of independent contractor status. Other federal agencies, different states and localities, and the various court systems continue to use different methods to determine whether a worker is an independent contractor:

• The United States Department of Labor (DOL) currently uses an “economic realities” test to assess the employer-employee relationship. The DOL’s test would be used to determine whether a worker is entitled to minimum wage and/or overtime pay under the Fair Labor Standards Act. The DOL is also in the process of reverting to a different, Obama-era standard
• The Internal Revenue Service (IRS) relies on a three-factor common law test to determine whether an individual providing services is an employee or an independent contractor for the purpose of tax withholding and payment. These factors include whether the employer exercises sufficient behavioral and/or financial control over the worker in question and the relationship between the parties
• New York courts generally look to 12 factors to determine whether an employer-employee relationship exists, for the purposes of analyzing wage and hour claims under state law. Similar to the DOL’s economic realities test, these 12 factors are used to determine the degree of supervision, direction, and control exercised over the worker performing services
• Other jurisdictions, including California, Massachusetts, and New Jersey, use the “ABC” test to evaluate whether workers are employees and thereby entitled to minimum wage, overtime pay, and other benefits under state law. This test is akin to the common law test used by the IRS in that it, too, evaluates the behavioral control, financial control, and the relationship between the employer and worker. However, under the ABC test, a worker is always considered an employee unless the employer can demonstrate that (1) the worker is free from the control and direction of the business in connection with the performance of the work; (2) the worker performs work that is outside the usual course of the employer’s business; and (3) the worker is customarily engaged in an independently established business, occupation, or trade that is of the same nature as the work performed for the employer.