The National Labor Relations Board (NLRB) has once again changed its independent contractor classification rules. The NLRB’s latest decision in Atlanta Opera[i] reestablishes an Obama-era “economic realities” standard making it more difficult for employers to correctly classify independent contractors under NLRB standards.
The shifting sands of NLRB independent contractor analysis have resulted in significant changes over the past decade. A 2014 NLRB decision reframed prior independent contractor analysis by deemphasizing a workers’ “entrepreneurial opportunity” and focusing more on the overall “economic realities” of the worker/employer relationship. An economic realities analysis provides a multi-factor approach, whose ultimate inquiry is whether, as a matter of economic reality, the worker is either “economically dependent” on the employer for work (i.e., considered an employee) or is in business for themselves (i.e., an independent contractor).
A later shift in the political landscape in 2018 saw this analysis reversed back to a pre-2014 focus on entrepreneurial opportunity. Under this analysis, where a worker had entrepreneurial opportunity – the ability to work for multiple employers – the immediate presumption was that the employer obviously exercised less control thereby signaling an independent contractor status.
This latest pendulum swing – back to an economic realities test – sees the NLRB focusing its entrepreneurial opportunity analysis on the actual – not theoretical – opportunities a worker has in working for multiple businesses and what constraints any one business may impose on the worker’s ability to pursue other opportunities. Other factors considered in the NLRB’s “independent business analysis” will typically include whether the ability to work for others is realistic and to what extent does the individual possess control over making key business decisions (e.g., commitment of capital, ability to make independent decisions on how/when the work is performed).
Considering the revised review standard employers should:
- Continue to engage in a fact-specific analysis of workforce needs when it comes to engaging independent contractors.
- Develop an internal review process for engaging independent contractors.
- Review current independent contractor agreements with an eye toward any language that would conflict with the revised rule; focusing on economic independence of the individual when it comes to:
- Reality of the individual working for other businesses;
- Proprietary or ownership interest in the individual’s work; and
- Control over key business decisions (e.g., scheduling, use/purchase of equipment, capital expenditures).
NOTE: California employers remain subject to the state’s statutory ABC Test for determining whether an individual qualifies as an independent contractor.
[i] 372 N.L.R.B. No. 95 (June 13, 2023).