National Labor Relations Board Revises Independent Contractor Standard

Recently, the National Labor Relations Board (NLRB) overturned the existing legal standard for classifying workers as employees or independent contractors. The Board’s decision in The Atlanta Opera, Inc.,[1] shifts the focus from a worker’s “entrepreneurial opportunity” for gain or loss as the “core” standard of the independent contractor test to an employee-friendly, multi-factor analysis. This decision is important to both union and nonunion employees because independent contractors, as opposed to employees, are excluded from the National Labor Relation Act’s (NLRA) protections. More workers will likely be deemed employees and, thus, eligible for labor law protections.

In The Atlanta Opera case, makeup artists, wig artists, and hairstylists working for The Atlanta Opera filed an election petition, seeking representation by a union. The Atlanta Opera argued that these artists were independent contractors and not statutory employees protected under the NLRA. Following a hearing, the NLRB Regional Director determined that the artists were statutory employees, not true independent contractors.

In upholding the decision, the NLRB considered whether it should stay with the existing independent-contract standard in SuperShuttle DFW or revert back to the independent-business analysis. The Board ultimately rejected the previous ruling that “entrepreneurial opportunity” should be the animating principle of the independent contractor test. Instead, it said that “entrepreneurial opportunity” should be taken into account alongside a list of traditional common-law factors. The new analysis focuses on whether workers have the ability to work for other companies, possess a proprietary interest in their work, and exercise control over important business decisions. Several factors were considered, including:

1. The extent of employer control;
2. The nature of the occupation or business;
3. The presence of supervision;
4. Required skill level;
5. Provision of tools and workspace;
6. Length of employment;
7. Payment structure;
8. The worker’s relevance to the employer’s business;
9. The parties’ understanding of their relationship; and
10. And the contractor’s independent business activities.

Applying these factors to The Atlanta Opera case, the Board found that most factors indicated that the workers should be classified as employees. The Atlanta Opera exerted control over their daily work, provided instructions and feedback, supplied necessary equipment and supplies, and compensated them on an hourly basis with the possibility of overtime pay.

The Atlanta Opera ruling represents an employee-friendly shift in the NLRB’s independent contractor standard, potentially leading to more workers being classified as employees with NLRA protections. Employers relying on independent contractors should review their policies to ensure compliance with the ruling.

[1] 372 NLRB No. 95 (2023).