More Workers Likely to be Considered Independent Contractors and Not Employees, Under NLRB’s New Ruling

February 6, 2019

By: Shari A. Alexander

On January 25, 2019, the National Labor Relations Board (the “NLRB” or the “Board”) overturned its 2014 independent contractor test, which had extended labor law rights under the National Labor Relations Act (the “NLRA”) to more workers.  The new test will make it easier for employers to show that their workers are independent contractors, who do not have unionizing rights under the NLRA.

The NLRB’s decision in SuperShuttle DFW, Inc., 367 NLRB No. 75, involved a petition for an election filed by a union seeking to represent the SuperShuttle van drivers who transport passengers to and from the Dallas-Fort Worth area airports.  The drivers each signed a Uniform Franchise Agreement with SuperShuttle, under which each driver paid a flat one-time initial fee, and then a flat weekly fee to maintain the franchise.  The Regional Director of the Board applied the 10-factor common law agency test and found the drivers/franchisees to be independent contractors and not employees.  As a result, the drivers had no rights under the NLRA and the petition for a union election was dismissed.

A 3-1 majority of the Board affirmed, emphasizing that each of the agency test factors should be viewed through an “entrepreneurial opportunity” lens.  In doing so, the Board overruled prior cases, including its 2014 decision in FedEx Home Delivery, 361 NLRB 610, which limited the importance of the workers’ “entrepreneurial opportunity,” and instead emphasized economic dependency and control. 

The 10 agency test factors are:

  • How much control the employer/principal may exercise over the details of the work;
  • Whether or not the worker is engaged in a distinct occupation or business;
  • The kind of occupation and whether the work is usually done under the direction of the employer or by a specialist without supervision;
  • The skill required in the occupation;
  • Whether the employer or the worker supplies instrumentalities, tools, and the place of work for the person doing the work;
  • The length of time for which the person is employed;
  • The method of payment, whether by the time or by the job;
  • Whether or not the work is part of the regular business of the employer;
  • Whether or not the parties believe they are creating an independent contractor relationship; and
  • Whether the principal is or is not in business.

In finding that the SuperShuttle van drivers/franchisees were independent contractors and not employees under this agency test, the Board considered the most significant factors to be: (a) that the drivers were required to provide their own vehicles and to cover all of the costs of operation and maintenance of the vehicles, (b) that the drivers were able to accept or decline trips booked by passengers, (c) that the drivers paid a flat weekly franchise fee unconnected to the amount of fares they collected, and (d) that the drivers’ earnings were determined by how much they chose to work, how well they managed expenses, and how well they managed the process of selecting which fares to accept or decline.

This decision restores an older standard for distinguishing independent contractors from employees, however, it bears considering whether this test will outlive the current administration.  Lauren McFerran, the NLRB’s sole Democratic member, dissented, stating that her Republican colleagues had no evidence to support their contention about entrepreneurial opportunity being at the center of the common-law test for agency and that, in addition to departing from the common law, the new standard fails to consider the realities of working relationships.

Legal guidance is important to successfully adjust your business practices to potentially take advantage of this change in ruling.  Additional federal, state and local laws, however, may be in tension with this ruling, requiring careful analysis to navigate this change.