NLRB Revised Its Independent Contractor Test to Focus on Entrepreneurial Opportunity

On January 25, 2019, the federal National Labor Relations Board revised its own test to determine whether a worker is properly classified as an independent contractor. The new test in SuperShuttle DFW places a worker’s “entrepreneurial opportunity for gain or loss” at the core of its independent contractor analysis. The practical implication of this decision is that fewer workers nationally will be classified as employees and therefore subject to the protections of the National Labor Relations Act.

When determining whether to classify a worker as an independent contractor, the NLRB has long evaluated various common law factors, including: (1) the extent of the employer’s control over the work, (2) the length of the employment relationship, (3) the method of the worker’s payment, (4) whether the worker is employed in a distinct occupation or business, (5) whether the work is done at the employer’s direction, (6) whether the employer supplies the instrumentalities, tools, and place of work, and (7) whether the parties believe they are creating an employee-employer relationship.

The D.C. Circuit has previously held that these factors should be evaluated through the lens of “whether the position presents the opportunities and risks inherent in entrepreneurialism.” FedEx Home Delivery v. N.L.R.B., 563 F.3d 492, 497 (D.C. Cir. 2009). In 2014, the NRLB rejected the D.C. Circuit’s reasoning and simply considered entrepreneurial opportunity as one factor. Instead the inquiry focused on whether the worker is “rendering service as part of an independent business.”

In SuperShuttle DFW, the NLRB overruled its own 2014 decision and placed entrepreneurial opportunity at the core of its independent contractor analysis to conform with the D.C. Circuit’s approach. In practice, the new test was likely outcome determinative in this case: the workers at issue all set their own schedules, chose where to work, bore the cost of their vehicles, and generally lacked supervision by the employer. These factors led the NLRB to conclude that the workers were independent contractors, despite the fact that these workers were integrated in the employer’s business and could not work for the employer’s competitors.

While this decision will affect workplaces nationwide, its impact will be limited on employers whose workers are in Massachusetts. Massachusetts has a statute that codifies the independent contractor test for various state employment laws. As we have discussed previously, this state statute has a bright line rule that presumes that any work arrangement between an individual and an employer creates an employer-employee relationship. Furthermore, the NLRB’s test only applies to the National Labor Relations Act, which has a limited impact on non-union workplaces. However, this decision may permit employers outside of the Commonwealth to reclassify certain workers, and it will certainly be cited as persuasive authority in any attempts to alter any common law independent contractor analysis. It also reflects a pattern of employer-friendly decisions by the administration and its appointees, which we have discussed both at the NLRB and the Department of Labor.

Employers or workers with questions about independent contractor classification should contact one of Conn Kavanaugh’s experienced employment lawyers.

DANIEL R. FISHMAN

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