Atlanta Opera: The NLRB Faces the Independent Contractor Music Once More

On June 13, 2023, the National Labor Relations Board (NLRB) released a decision, referred to as Atlanta Opera Inc. (372 NLRB No. 95), that marks a shift in the applicable test for whether a worker qualifies as an independent contractor under the National Labor Relations Act (NLRA). This decision may add an additional hurdle for employers to prove that workers are independent contractors who lack the protections provided by the NLRA and serves as another developmental signpost of a complicated yet crucial journey that employers should pay attention to when classifying their workers.

A Brief History of the Recent “Independent Contractor” Developments

In 2014, the NLRB issued a decision, referred to as FedEx II, where it utilized a longstanding “common law” test to determine whether a worker was an individual contractor. This test relied on ten factors, including:

1. the extent of control which, by agreement, the employer has over the worker;
2. whether the worker is engaged in a distinct job or business;
3. the kind of job the worker has, with reference to whether the work is usually done under the direction of the employer or by an unsupervised specialist;
4. the skill required in the particular job;
5. whether the instrumentalities, tools, and place of work are provided by the employer or the worker;
6. the length of time the person works for the employer;
7. the method of payment, whether by the time or by the job;
8. whether the work is part of the employer’s regular business;
9. whether the parties believe they are creating a “master” and “servant” relationship; and
10.  whether the principal is in the business.

In addition to these enumerated factors, the Board has historically considered the worker’s “entrepreneurial opportunity” in its independent contractor analysis. However, in a notable change from judicial precedent, the NLRB stated that it “would only give weight to actual, but not merely theoretical, entrepreneurial opportunity” and that it “should necessarily evaluate the constraints imposed by a company on the individual’s ability to pursue this opportunity.” Notwithstanding, the NLRB emphasized in FedEx II that all factors must be weighed, with no one factor being decisive.

In 2019, the NLRB reversed the FedEx decision. Relying on the 1968 Supreme Court decision in NLRB v. United Insurance Co. of America and the Restatement (Second) of Agency, it held that the test in FedEx II wrongly diminished a worker’s entrepreneurial opportunities in the independent contractor test by limiting it to one factor. The NLRB concluded that entrepreneurial opportunities are an independent factor in a “non-exhaustive” list to be “weighed with no one factor being decisive.” SuperShuttle DFW, Inc., 367 N.L.R.B. No. 75 (Jan. 25, 2019). This test was a return pre-FedEx precedent, and the NLRB stated that it “may evaluate the common-law factors through the prism of entrepreneurial opportunity when the specific factual circumstances of the case make such an evaluation appropriate.” The approach in SuperShuttle resulted in a more relaxed test for employers seeking to classify workers as independent contractors.

Atlanta Opera: The NLRB Returns to FedEx II in 2023

On Tuesday, the NLRB reversed the SuperShuttle standard and reinstated the FedEx II standard. The Board held that the SuperShuttle standard conflicted with U.S. Supreme Court precedent and concluded that the common law test continues to remain the appropriate method to determine whether a worker is an employee or independent contractor. The Board held that the clash came from SuperShuttle’s classification of a worker’s entrepreneurial opportunity as an “animating principle” for each of the common law test factors. In Atlanta Opera, the Board reiterated its FedEx II principles that (1) weight should only be given to actual, and not theoretical, entrepreneurial opportunity; and (2) it “should necessarily evaluate the constraints imposed by a company on the individual’s ability to pursue this opportunity.” The Atlanta Opera decision provides us with factors to evaluate these potential constraints on entrepreneurship:

1. whether the worker has a realistic opportunity to work for other employers and that they regularly pursue jobs in their profession and/or in the broader economy when they are not working for the employer;
2. whether the worker has a proprietary or ownership interest in their work;
3. whether the worker has control over important business decisions, including but not limited to (a) scheduling of performance; (b) the hiring, selection, and assignment of employees; (c) the purchase of use and equipment; and (d) the commitment of capital.

The Board concluded that this factor “synthesizes the full constellation of considerations that the board has addressed under the rubric of entrepreneurialism.”

What Employers Should Know

Because the NLRB’s Atlanta Opera test and the SuperShuttle test contained the same set of “common law” factors, employers likely will not – at this time – have to significantly change worker classifications. Nevertheless, employers would benefit from reviewing their independent contractor workers’ job duties to ensure that either: (1) these workers have a realistic opportunity to work for other employers and/or exert control over their work and certain business decisions; or (2) if they do not have these entrepreneurial opportunities, the workers have duties that would qualify them as independent contractors under the “common law” factors.