The NLRB Restates a Prior Standard for Independent Contractor Classification

On June 13, 2023, the National Labor Relations Board (NLRB) issued a decision, The Atlanta Opera, regarding the determination of whether an individual is an employee or an independent contractor.  This decision overturns a Trump-era NLRB decision and reverts to an Obama-era NLRB decision on this same topic.

Background

            Section 2(3) of the National Labor Relations Act (the Act) excludes from the definition of a covered “employee” “any individual having the status of an independent contractor.”  In other words, only employees (as defined in the Act) are entitled to the protections of the Act, including the right to unionize and protections against unfair labor practices.

The factors found in the Restatement (Second) of Agency, Section 220 are as follows:

• Extent of control by the employer;
• Whether or not the individual is engaged in a distinct occupation or business;
• Whether the work is usually done under the direction of the employer or by a specialist without supervision;
• Skill required in the occupation;
• Whether the employer or the individual supplies instrumentalities, tools, and the place of work;
• Length of time for which the individual is employed;
• Method of payment (by the time or the job);
• Whether or not the work is part of the regular business of the employer;
• Whether or not the parties believe they are creating an independent contractor relationship; and
• Whether the principal (the employer) is or is not in business.

In addition to these factors, as noted above regarding the entrepreneurial opportunity, the NLRB will consider whether the evidence tends to show that the individual is, in fact, rendering services as an independent business.    

Impact on Employers

            Employers who use independent contractors should review that use using these specific factors.  This is especially true if an employer has had recent union organizing activity.  Employers with a unionized workforce will also want to conduct a thorough review so that any independent contractors don’t inadvertently become part of the unionized workforce.

As a reminder, The Atlanta Opera decision only applies to the determination of coverage under the Act.  Other state and federal laws use different factors and rules to determine independent contractor status.   Given this, it is important to stay compliant regarding worker classification. 

While we expect a new independent contractor rule from the U.S. Department of Labor (DOL), its publication has been delayed until October 2023, five months later than originally stated by the DOL. 

            As always, if you have any questions on this topic, please contact your Stall Legal attorney.