The legal battle over the question of independent contractor (IC) versus employee status produced a decision Tuesday at the National Labor Relations Board that is seen as likely to favor defining a worker as an employee rather than as an IC.
In a case known as Atlanta Opera, the Democrat-controlled NLRB ruled in favor of defining several different types of workers for that city’s opera company as employees rather than independent contractors, which is how the opera company classified them.
But the status of the workers was less significant than the fact that in handing down its decision, the NLRB overturned the so-called Super Shuttle precedent. That NLRB decision from 2019 came down heavily on the side of making it easier to define workers as ICs rather than employees.
The NLRB decision that the opera company’s workers were employees was not controversial. The one dissenting NLRB board member, Marvin Kaplan, agreed with the rest of the board that the workers, who were stylists such as hairdressers, were employees, not ICs.
Instead, Kaplan’s dissent was over the NLRB decision to toss out the Super Shuttle precedent in favor of what is known as FedEx II, in reference to a decision involving that company that had been the governing guideline at NLRB prior to Super Shuttle.
The board’s decision upheld a regional director’s decision that the workers were employees.
The legal community that watches IC law had identified the Atlanta Opera case back in 2021 as one that the full NLRB board, with a shift in political control, was likely to use to dump the Super Shuttle precedent and go back to FedEx II. The NLRB decision cited other cases to back up its arguments, including a similar FedEx (NYSE: FDX) case known as FedEx I.
Super Shuttle, a 2019 case involving the company that transports its passengers primarily to airports, set the primary definition of an IC as one who in his or her work for a company can benefit from “entrepreneurial opportunity” and enhance his or her financial gain. The Super Shuttle decision said control and “entrepreneurial opportunity are two sides of the same coin: the more of one, the less of the other.”
The full NLRB board in 2019, in handing down the Super Shuttle decision, cited a decision by the federal district court for the District of Columbia that it said elevated the question of entrepreneurship. In rejecting what was in FedEx II, the NLRB board said that precedent severely limited “the significance of entrepreneurial opportunity to the analysis.”
But the current NLRB, in its decision Tuesday, said earlier board decisions prior to Super Shuttle had “never afforded special weight or significance to ‘entrepreneurial opportunity.’” It criticized the 2019 board’s interpretation of earlier decisions as having elevated the question of entrepreneurship above other factors.
Jack Finklea, a partner at the trucking-focused Scopelitis law firm, said staff at the NLRB had determined back in 2021 that the Atlanta Opera case could be the pathway to overturning the Super Shuttle precedent and reinstating FedEx II. Control over the NLRB shifted from Republican to Democrat that year, following the inauguration of Joe Biden as president.
“There were some [friend of the court] filings that wanted to really make this an ABC test-type thing,” Finklea said, a reference to the employee/IC three-pronged test that comes down heavily on the side of finding a worker to be an employee and is at the heart of California’s AB5 law governing the question of IC versus employee. Finklea said Supreme Court precedents might have made bringing in the ABC test challenging, so it wasn’t pursued.
“But there is no question that the test on finding a worker as an IC is tougher today than it was two days ago,” Finklea added of the Atlanta Opera decision.
According to Finklea, the NLRB generally handles issues of unionization and employee organization. He said the Atlanta Opera workers had taken a unionization vote (that reportedly was unanimous in favoring unionization, according to the union seeking to organize the workers). But the Atlanta Opera argued the workers were independent contractors and could not unionize if the classification of them as ICs was upheld.
Carrie Hoffman, a partner with the law firm of Foley & Lardner, said the changes from the NLRB decision are simply “returning to where we were pre-Super Shuttle.”
“It is a return to the common law factor,” she said, as opposed to Super Shuttle, which was “much more employer friendly.”
The common law test involves several points to determine the IC versus employee issue. The test involves the ever-important question of “control” and how much of it a purportedly independent contractor has.
Hoffman said the opinion handed down by the NLRB could be cited by attorneys in IC/employee disputes in other legal venues, “but I don’t know that a court is going to pay attention to it.”
Its impact will overwhelmingly be for actions taken by the NLRB, she added.
There can be an impact from the decision that extends beyond the walls of the NLRB, Finklea said. In a case impacting trucking before the Wage and Hour Division of the Department of Labor, for example, “some attorney might use the NLRB decision to say, ‘This is what employee control means.’”
But he added the NLRB decision would not likely set a precedent outside that agency’s activities. In particular, the Wage and Hour Division, in its rulings regarding IC versus employee issues, uses the “economic realities” test to help answer that question.
The proposed DOL rule on independent contractor status is undergoing an overhaul to align more with Biden administration philosophy.
The Trump administration rule that is still in place also relies on the economic realities test but with different guidance on how it is to be interpreted than the Obama administration rule it replaced and the Biden proposal that is working its way through the rulemaking process.
In particular, the Trump administration rule elevates two “core factors” above the others in determining IC versus employee status: how much control a worker has and the ability to profit from how he or she performs functions in the job. Similarly, the Super Shuttle decision gave special weight to the question of entrepreneurship.
Away from the legal wording of its decision, the NLRB announced its action in a prepared statement. The board said it had “reaffirmed longstanding principles — consistent with the instructions of the Supreme Court — and explained that its independent-contractor analysis will be guided by a list of common-law factors.”
“The Board expressly rejected the holding of the SuperShuttle Board that entrepreneurial opportunity for gain or loss should be the ‘animating principle’ of the independent-contractor test,” it said in the statement.
Finklea added that he would expect the reimposition of the FedEx II precedent in place of Super Shuttle to affect existing cases as well as future ones.
Kristin Sharp, the CEO of trade association Flex, which represents app-based rideshare platforms like Uber, said in a prepared statement that the NLRB decision is “yet another example of regulators trying to push an ideological agenda with little regard for the impacted workers. The 21st century economy is enabled by technology and defined by unprecedented worker flexibility and choice — and we should be celebrating these options, not limiting them.”
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