The National Labor Relations Board, in a 3-1 ruling in Atlanta Opera, returned to an Obama-era test which determines when workers considered independent contractors by a company may organize a union. This decision reverses the previous Board’s ruling that increased clarity and certainty in this complex area of the law.
Previous rule emphasized entrepreneurial opportunity. In recent years, the status of workers as independent contractors has become highly contentious, as so-called “gig workers” and others seek the flexibility of having their own business. This has created uncertainty in every applicable area of employment law, most notably FLSA overtime rules, ERISA employee benefits rights, and the ability to form a union under the National Labor Relations Act. The previous Board, in a case involving DFW shuttle drivers (SuperShuttle), established a rule that retained a long-standing test which focused on the whether the workers have “an entrepreneurial ability” for gain or loss from other clients. The SuperShuttle ruling was affirmed by the D.C. Circuit as consistent with the Court’s settled position.
The case involves opera hair stylists. In Atlanta Opera, the hair stylists for the opera had sought to form a union even though they were not considered employees by the opera company. The NLRB administrative law judge ruled them to be employees, finding, among other things, that they lacked any entrepreneurial opportunity. Thus, the Board could have simply applied SuperShuttle to confirm the ALJ’s ruling, which would have resulted in a unanimous Board ruling, without any dissent by Republican Member Marvin Kaplan.
HR Policy Association weighed in. While the case would have reached the same result under the previous rule, the Board has been eager to overturn previous rulings and create new law in this and numerous other areas (many listed in the just-released Spring regulatory agenda). It asked interested parties to file amicus briefs in Atlanta Opera. HR Policy joined other business groups in urging the Board not to return to the Obama Board’s “more restrictive standard converting long established independent contractors into employees . . . destabilizing a number of industries . . . and depriving many independent contractors of their preferred flexible work methods and entrepreneurial opportunities.”
Dissent disputes Board claim to return to settled law. In Atlanta Opera, the Board contends that it is returning to the long-standing common law test applying several factors in determining independent contractor status. However, in a strong dissent, Republican Member Marvin Kaplan asserts that the ruling diminishes the longstanding consideration of entrepreneurial opportunity . He pointed out that the Board will now require that the opportunity not only exist, but that the independent contractor actually provide services on a continuous basis to other businesses.
Greater uncertainties lie ahead with clarity sorely needed. Compared with the independent contractor test under other federal laws, the Board’s new ruling has limited application. It will only apply where a group of independent contractors seek to assert their labor rights by trying to form a union, ask to be included in an existing union, or exercise other concerted activities. The Department of Labor is considering a rule that would have much broader applicability, resulting in many more independent contractors being eligible for overtime.
Outlook: In addition, later this year, the Securities and Exchange Commission will likely add to the risks with a proposed human capital metrics (HCM) reporting rule requiring identification of the number of independent contractors each public company uses. With multiple laws in play, involving varying determinations of independent contractor status, the headaches will continue to multiply. Only Congress can clarify for all purposes who is and who is not an independent contractor under federal laws, with preemption of state laws as well. In other words, be prepared for more chaos.
