Last week, the National Labor Relations Board (“Board”) issued a decision changing the legal standard it will use to determine whether workers are “employees” covered by the National Labor Relations Act (“NLRA”), or independent contractors who are not.
Prior to 2019, the Board’s test for determining whether a worker was a statutory employee or independent contractor weighed a variety of factors, including those outlined in the Restatement (Second) of Agency:
(a) the extent of control which, by the agreement, the employer may exercise over the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or business;
(c) 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;
d) the skill required in the particular occupation;
e) whether the employer or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h) whether or not the work is a part of the regular business of the employer;
(i) whether or not the parties believe they are creating the relation of employer and employee; and
(j) whether the principal is or is not in business.
In 2019, the Board (made up of a majority of members appointed by President Trump) replaced this long-time standard with a test that evaluated these factors through a prism of “entrepreneurial opportunity.” It was presumed that, the more entrepreneurial opportunity the worker had, the employer exercised less control over the worker.
Last week’s decision overruled the 2019 case and returned the independent contractor analysis to the former, well-known standard based on the Restatement factors. Entrepreneurial opportunity should be treated as one aspect of a multifactor test with no factor receiving determinative weight.
The new ruling may make it more likely that workers will be found to be employees entitled to protections under the NLRA, and is in line with the many recent employee-friendly decisions of the Board under President Biden. Employers who contract with independent contractors will want to review such relationships to ensure they are appropriately characterized under the new standard.
Ballard Spahr’s Labor and Employment Group frequently advises employers on labor issues under the NLRA and defends employers in matters before the NLRB. We also frequently advise employers on issues related to whether workers are appropriately classified as employees and independent contractors under the NLRA and other employment laws, including conducting classification audits. Please contact us if we can assist you with these matters.