Entrepreneurial Opportunity Takes A Back Seat In Revised NLRB Test Of Employee Versus Independent Contractor Status

On June 13, 2023, in a 3-1 decision, the NLRB overruled its own 2019 decision in SuperShuttle DFW and returned to the test of statutory employee status in its 2014 FedEx II decision which it terms carefully calibrated. In doing so, the Board held that the Atlanta Opera’s makeup artists, wig artists, hairstylists, and others who worked at the Opera only when operatic productions were staged are employees within the meaning of the National Labor Relations Act, and not independent contractors. The Atlanta Opera, Inc. The NLRB refused to apply the U.S. Court of Appeals 2009 ruling in FedEx I which held that entrepreneurial opportunity is an animating principle of the independent contractor test and accused the Court of misperceiving Board law. The Board decision in Atlanta Opera leaves no doubt that entrepreneurial opportunity is not a super-factor in the analysis of employee status, and is only one factor to be considered in analyzing independent contractor versus employee status. The NLRB held that its prior SuperShuttle DFW holding is no longer the law since it conflicts with common law agency principles, and U.S. Supreme Court and NLRB precedent.

The NLRB based its decision on the 1992 Supreme Court decision in Nationwide Mutual Insurance Co. v. Darden, and borrowed heavily from the Restatement (Second) of Agency for this multifactor test:

1. The extent of control which, by agreement, the master may exercise over the details of the work. The Board found that this factor indicated employee status;
2. Whether the worker is engaged in a distinct occupation or business. The Board found that this factor indicated independent contractor status;
3. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of an employer or by a specialist without supervision. The Board found that this factor indicated employee status;
4. skill required in the particular occupation. The Board found that this factor indicated independent contractor status;
5. Who supplies the instrumentalities, tools, and the place of work for the person performing the work. The Board found that this factor indicated employee status;
6. The length of time the worker is engaged to perform the services. The Board found that this factor indicated independent contractor status;
7. The method of payment, whether by the time or by the job. The Board found that this factor indicated employee status;
8. Whether the work is a part of the regular business of the master. The Board found that this factor indicated employee status;
9. Whether the parties believe they are in a master-servant relationship. The Board found that this factor was inconclusive; and
10. Whether the principal is or is not in business. The Board found that this factor indicated employee status.

The Board concluded that “all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.” The NLRB found that the Opera did not prove that factors ## 2, 4 and 6, which favored independent contractor status, outweighed the six factors favoring employee status. Finally, the Board conceded that the entrepreneurial opportunity factor still applies, but held that the Opera’s stylists had no opportunities during Opera productions for additional income, even though they could work for other employers in between productions, reasoning that the stylists worked part-time, on a seasonal and intermittent basis, which made exclusive employment with the Opera unrealistic. In this way, the Board was able to find that the stylists’ entrepreneurial opportunity to work for other employers was outweighed by the other six factors.

The Atlanta Opera decision is yet another example of the Biden-appointed Board returning to a more union- and employee-friendly precedent that was either overruled or modified by the Trump-appointed Board. We should expect more of these Board reversals. This decision signals to employers that even if a worker has an opportunity to earn income from other pursuits and sources while the worker is performing services for the employer, this fact alone will not dictate a finding of independent contractor status and, as shown here, might not preclude a finding of employee status.

For more information, please contact Patrick W. McGovern, Esq., Partner in the firm’s Labor Law and Employment Law & Litigation practice via email here or call 973.533.0777.