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NLRB Gets Back in the Time Machine, Reverts to Previous Independent Contractor Test

It’s 2023: do you know who your employees are? If you think you do, think again: the National Labor Relations Board announced in a June 13th decision on the case The Atlanta Opera, Inc., that it is changing its test for determining which workers are independent contractors and which are covered employees, reverting once again to an Obama-era standard.  For employers, this means that the potential for running into issues with misclassification and unionization has increased significantly.

Until this recent change, the NLRB’s test for determining the classification status of a worker as an independent contractor came from the 2019 SuperShuttle case, which stated that a worker’s potential for “entrepreneurial opportunity” is the “animating principle”—or primary factor—in determining whether that worker is an independent contractor, and all other factors in the common law test should be evaluated in light of that animating principle. That is to say, if there exists a potential for a worker to engage in entrepreneurial opportunity for economic gain, they would be very likely to be considered an independent contractor under the SuperShuttle test.

However, per the June 13th decision in Atlanta Opera, the NLRB has reversed the effects of the SuperShuttle decision and has returned to the standard it replaced, which was established by the 2014 case FedEx Home Delivery. The standard established by FedEx, now re-adopted, states that entrepreneurial opportunity is only one factor among many for determining independent contractor status. While SuperShuttle focused on entrepreneurial potential, the FedEx test focuses on whether the supposed independent contractor is actually, in fact, performing their services as part of an independent business.

What does this mean for employers? Broadly, it means that workers previously classified as independent contractors may very well be reclassified as covered employees under the newly readopted FedEx test. The first impact of this reclassification relates to an employer’s obligations to its employees: whereas independent contractors were just that—independent, employees present a new set of responsibilities, such as benefits, tax differences, wage differences, and more, costing employers more in administrative headaches as well as money.

The second impact of the reclassification of so many independent contractors as employees is that while independent contractors are not covered by the National Labor Relations Act, employees are. This means that those workers now have the right to engage in protected concerted activities per Section 7 of the NLRA. This opens the door for more employees to engage in collective bargaining and unionizing activities that would not have previously been available to them.

The Atlanta Opera decision means big changes for employers who utilize the work of independent contractors—and it’s time for such employers to reevaluate their arrangements with those workers. For assistance reviewing worker classification for your business, contact McBrayer today.

Cynthia L. Effinger, Member with McBrayer, is located in the firm’s Louisville office. Ms. Effinger’s practice is concentrated in the areas of employment law and commercial litigation. Her employment law practice is focused on drafting employment manuals and policies, social media, wage and hour, non-compete agreements and workplace discrimination. Ms. Effinger can be reached at ceffinger@mcbrayerfirm.com or (502) 327-5400, ext. 2316.

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This article does not constitute legal advice.

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