Quick Flashback—NLRB Overruled Obama Board’s “Independent Contractor” Test

Rosemary McKenna

Earlier this year, the National Labor Relations Board (“NLRB” or “the Board”)—with its 3-to-1 Republican-appointed majority—returned to its long-standing common-law test for determining whether workers are independent contractors (“ICs”) or employees, expressly overruling an Obama-era decision, which it said impermissibly altered the test by severely limiting the significance of “entrepreneurial opportunity” to the analysis. The importance of “independent contractor” status lies in the fact that ICs are not covered by the National Labor Relations Act (“NLRA”).

In SuperShuttle DFW, Inc. and Amalgamated Transit Union Local 1338 (Case No. 16-RC-010963), the Trump Board addressed the issue of whether franchisees who operated shared-ride vans were ICs and thus excluded from coverage under the NLRA. Relying on common-law agency analysis, the Board upheld a regional director’s decision finding the franchisees to be ICs. That traditional common-law analysis involves application and consideration of the following factors:

      1. The extent of control which, by the agreement, the alleged employer may exercise over the details of the work;
      2. Whether or not the alleged employee is engaged in a distinct occupation or business;
      3. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the alleged employer or by a specialist without supervision;
      4. The skill required in the particular occupation;
      5. Whether the alleged employer or the potential employee supplies the instrumentalities, tools, and the place of work for the person doing the work;
      6. The length of time for which the person is employed or engaged;
      7. The method of payment, whether by the time or by the job;
      8. Whether or not the work is part of the regular business of the alleged employer;
      9. Whether or not the parties believe they are creating an employment relationship; and
      10. Whether the principal is or is not in business.

The Board emphasized that, although it is not a separate factor, “entrepreneurial opportunity, like employer control, is a principle by which to evaluate the overall effect of the common-law factors on a putative contractor’s independence to pursue economic gain.” The Board held that, going forward, it will continue to evaluate the common-law factors through the prism of entrepreneurial opportunity.

Importantly, the Board expressly rejected the decision in FedEx Home Delivery, 361 NLRB 610 (2014), enf. denied 849 F.3d 1123 (D.C. Cir. 2017). In that case, the Obama Board held that entrepreneurial opportunity represented merely “one aspect of a relevant factor that asks whether the evidence tends to show that the putative contractor is, in fact, rendering services as part of an independent business.” According to the Board in SuperShuttle, the FedEx Board significantly limited the importance of entrepreneurial opportunity by creating this new factor—“rendering services as part of an independent business”—and then making entrepreneurial opportunity merely one aspect of that factor. As such, the Board has overruled the FedEx decision and its attempt to fundamentally shift the IC analysis.

Having “return[ed] the independent-contractor test to its traditional common-law roots,” the Trump Board went on to apply the common-law factors and found that the SuperShuttle franchisees were ICs. Specifically, the Board held that the franchisees’ ownership or lease and control of their vans, their near control over their daily work schedules and working conditions, and their method of payment, provided them with significant entrepreneurial opportunity for economic gain and thus weighed strongly in favor of IC status. These factors, along with the absence of supervision of franchisees and the understanding between the parties that franchisees are independent operators, supported the Board’s finding that the franchisees were ICs and not employees under the NLRA.

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