The National Labor Relations Board (“NLRB”), the federal agency that oversees the rights of private sector employees to unionize, issued a decision making it easier for employers to classify individuals as independent contractors. Independent contractors do not have the right to unionize pursuant to the National Labor Relations Act. On January 25, 2019, the NLRB issued a decision affirming that airport shuttle franchisees were properly classified as independent contractors, as opposed to employees, and therefore were not eligible to unionize. SuperShuttle DFW, Inc. and Amalgamated Transit Union Local 1338, Case 16-RC-010963 (Jan. 25, 2019) In doing so, the court overturned a 2014 NLRB decision that had revised the test for determining whether individuals are independent contractors. FedEx Home Delivery, 361 NLRB No. 65 (2014). The opinion, penned by President Trump appointees, rejected the revisions made during President Obama’s era to what is known as the common-law agency test.
This test includes the following ten factors that courts review to determine whether individuals are properly classified:
(1) The extent of control which, by the agreement, the master may exercise over the details of the work;
(2) Whether or not the one employed is engaged in a distinct occupation or business;
(3) The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
(4) The skill required in the particular occupation;
(5) Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
(6) The length of time for which the person is employed;
(7) The method of payment, whether by the time or by the job;
(8) Whether or not the work is part of the regular business of the employer;
(9) Whether or not the parties believe they are creating the relation of master and servant; and
(10) Whether the principal is or is not in business.
The 2014 FedEx Board rejected an opinion by the D.C. Circuit Court of Appeals holding that the animating principle of this inquiry was whether an individual had “significant entrepreneurial opportunity for gain or loss.” Instead, the FedEx Board stated that a new factor to be considered is whether the evidence showed that the alleged contractor was in fact rendering services as part of an independent business and noted that only actual entrepreneurial opportunity (as opposed to theoretical opportunity) should be considered in evaluating whether an individual was an employee or a contractor.
The recent SuperShuttle rejects the revisions made by the 2014 FedEx Board, claiming that they impermissibly altered the common law test and longstanding precedent. In doing so, the board reverted back to the traditional common law test listed above.
So, What Does This Mean for Employers?
As an initial matter, employers must keep in mind that this ruling applies only to matters that may come before the NLRB. That means that properly classified independent contractors could not engage in unionizing campaigns. This common law test, however, does not replace any of the many other applicable independent contractor tests, including the IRS Right to Control Test (relating to federal taxes), the Economic Realities Test (applied for federal wage and hour matters), the Right to Control Test (used for discrimination statutes) or many of the other federal, state or local tests that exist to determine independent contractor status. Therefore, it is entirely possible that an individual may be considered a contractor pursuant to this decision but still be considered an employee for other purposes.
This decision is likely good news for the “gig” and “share” economies, including ride-sharing entities. It signals to employers that the NLRB is not currently seeking to expand protections to these non-traditional areas of employment and that an individual’s entrepreneurial opportunities still animate this analysis.
Finally, this confirms that the law related to independent contractors continues to be extremely complex, and penalties related to misclassifications can be steep. Employers should consult with their labor and employment counsel when it comes to independent contractors and misclassification concerns to navigate this ever changing area of the law.