The Return of Entrepreneurial Opportunity as a Hallmark of Independent Contractors

Recently the National Labor Relations Board (“NLRB”) reversed a 2014 NLRB decision that has major implications for distinguishing between independent contractors and employees for National Labor Relations Act purposes.  This question impacts whether particular workers are entitled to the protections of the Act, such as the right to unionize and to engage in other types of concerted activity regarding the workplace and conditions of employment.

For more than 40 years, the NLRB distinguished between employees and independent contractors using a common law agency test comprised of ten factors. See NLRB v. United Ins. Co. of Am., 390 U.S. 254, 256 (1968).  These factors include, for example, the required skill for the work, who supplies the tools, the method payment, and the intent of the parties. Bound up in the relevant factors are the countervailing principles of employer control and the worker’s entrepreneurial opportunity for gain or loss.

The focus of the test largely shifted in the NLRB’s FedEx Home Delivery, 361 NLRB 610 (2014) decision. In FedEx, the NLRB stated that “entrepreneurial opportunity represents 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.” Id. at 620. Thus entrepreneurial opportunity was quickly relegated from an overarching principle to but one aspect of one factor out of ten. Further complicating matters, the D.C. Circuit, which has jurisdiction over all NLRB appeals, rejected the NLRB’s new standard in the FedEx appeal, yet the NLRB continued to use the FedEx standard. See, e.g., Minnesota Timberwolves Basketball, LP, 365 NLRB No. 124, slip op. at 1 (Aug. 18, 2017) (utilizing NLRB’s FedEx standard).

This confusion was addressed when the NLRB reversed course in the recent case of SuperShuttle DFW, Inc., No. 16-RC-010963 (Jan. 25, 2019), restoring entrepreneurial opportunity as the principle that lies on the other end of the spectrum from an employer’s control of the work. Now the factors relevant to distinguishing employees from independent contractors under the National Labor Relations Act once again include: 1) the employer’s extent of control over the work; 2) the distinctness of the worker’s occupation or business; 3) whether the work is typically done at the employer’s direction or without supervision; 4) the requisite skill necessary to perform the work; 5) whether the worker or employer supplies the tools; 6) the length of time the worker is engaged; 7) whether the pay is per job or per time period; 8) whether the work is part of the employer’s regular business; 9) the parties belief regarding their status as master and servant; and 10) whether the employer is in business. See Restatement (Second) of Agency § 220 (1958).

Although the crux of the decision turned on the SuperShuttle drivers’ ability to set their own schedules (thus demonstrating entrepreneurial opportunity), the impact of the SuperShuttle decision reaches far beyond ride-sharing services. This decision restores the prominence of entrepreneurial opportunity to the equation, meaning factors such as a worker providing his or her own tools, or performing a distinct service, are more likely to result in a finding that the worker is an independent contractor under the NLRA. Employers may also refer again to pre-2014 precedent to understand how the NLRB is likely to decide as to any given fact pattern, as well as D.C. Circuit law which now accords with the NLRB approach.

The Bottom Line for Employers

The SuperShuttle decision promotes uniformity in the application of the test for determining which workers are independent contractors under the NLRA.  It also makes it easier for employers to show that a particular worker is an independent contractor, and thus not entitled to the protections of the statute.

Note, though, that while SuperShuttle offers helpful guidance with respect to classifying workers as independent contractors for NLRA purposes, it does not affect workers’ classifications under the FLSA or other labor laws, and employers should consult counsel to determine the applicable test for non-NLRA contexts.