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NLRB Reverses Position on Worker Misclassification Standards

· 5 minute read

· 5 minute read

Debbie Tam 

The National Labor Relations Board (NLRB) has issued a decision that reinstates its prior position requiring a 10-factor approach to determine whether a worker is an employee or independent contractor (The Atlanta Opera, Inc., NLRB Decision, Case No. 10-RC-276292, 6/13/2023).

Entrepreneurial opportunity as key factor in 2019 decision.

In 2019, the NLRB made a significant departure from its prior position on worker classification (see Payroll Update, 03/05/2019). Prior to the 2019 ruling, the NLRB applied the common-law agency test as outlined below that utilizes a 10-factor approach for worker classification determinations. However, the SuperShuttle decision departs from this approach by elevating one key factor above other considerations. Instead, the 2019 ruling lays out that whether a worker has entrepreneurial opportunities will support a finding that the worker is an independent contractor, and not an employee (SuperShuttle DFW Inc., NLRB Decision, Case No. 16-RC-010963, 1/25/19).

Common-Law Agency Test.

The National Labor Relations Act (NLRA) excludes independent contractors from its definition of employee (29 USC 152). Prior to the 2019 SuperShuttle decision, the NLRB reviewed a list of 10 factors to determine whether a worker was an employee or independent contractor. These factors include:

  • the extent of control which, by the agreement, the business may exercise over the details of the work;
  • whether or not the one employed is engaged in a distinct occupation or business;
  • 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;
  • the skill required in the particular occupation;
  • whether the employer or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
  • the length of time for which the person is employed;
  • the method of payment, whether by the time or by the job;
  • whether or not the work is a part of the regular business of the employer;
  • whether or not the parties believe they are creating the relation of employer and employee; and
  • whether the principal is or is not in business.

What’s old is new again.

In the  Atlanta Opera decision, the NLRB reinstates the use of the common-law agency test. The NLRB notes that entrepreneurial opportunity is considered in its determinations, however, no prior rulings before SuperShuttle elevated its significance in relation to other factors and in no ruling was entrepreneurial opportunity alone able to establish worker status. Specifically, the decision mentions the Supreme Court warned that “there is no shorthand formula or magic phrase that can be applied to find the answer, but all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.” Finally, the decision notes that the SuperShuttle decision overruled established standards with a “newly constituted Board.” The NLRB then overruled the SuperShuttle decision, bringing back the 10-factor approach.

DOL to release final regs on worker classification.

If this sounds familiar, it’s because it is. The NLRB’s reversal on the position is consistent with the U.S. Department of Labor’s proposed regulations on worker classification as it relates to workers covered under the Fair Labor Standards Act. A Trump-era worker classification rule rejected a multi-factor approach in favor of two core factors. Under the Biden administration, the DOL attempted to withdraw the rule, but those attempts were rejected by a federal district court. The DOL then released proposed regulations to reinstate the multi-factor approach but have been met with opposition. Since then, the DOL has been postponing its appeal proceedings until it can finalize its rulemaking on the issue. Those final regulations are projected for August, and no later than October (see Payroll Update, 6/15/2023).

 

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