NLRB to Revisit Independent Contractor Test for Third Time in Seven Years

The National Labor Relations Board (NLRB) is inviting public input as to whether it should reconsider its standard for determining the independent contractor status of workers.

Up until 2014, there had been some confusion as to what exactly the test was for an independent contractor. The NLRB itself acknowledged this in some of its decisions. Under the Obama administration, the NLRB sought to clarify the test in 2014 in FedEx Home Delivery, 361 NLRB 610, 611.  The NLRB explained that it considers the factors set forth in the Restatement (Second) of Agency § 220, with no one factor being determinative:

(a) The extent of control which, by the agreement, the master may exercise over the details of the work.

(b) Whether or not the one employed is engaged in a distinct occupation or business.

(c) The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision.

(d) The skill required in the particular occupation.

(e) Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.

(f) The length of time for which the person is employed.

(g) The method of payment, whether by the time or by the job.

(h) Whether or not the work is part of the regular business of the employer.

(i) Whether or not the parties believe they are creating the relation of master and servant.

(j) Whether the principal is or is not in the business.

The NLRB also held that it is permissible to consider a worker’s “entrepreneurial opportunity” as a factor, but rebuked an assertion by the D.C. Circuit that entrepreneurial opportunity had, over time, grown to be the determinative factor. Instead, in FedEx Home Delivery the NLRB viewed the overall test through the lens of economic dependency, which was interpreted as a more worker-friendly test.

In 2019, the NLRB reversed course in SuperShuttle DFW, Inc., 367 NLRB No. 75. It held that FedEx Home Delivery had “impermissibly diminished the significant of entrepreneurial opportunity”. It agreed with the D.C. Circuit that in recent years entrepreneurial opportunity had subtly become the primary lens through which the NLRB would look to determine independent contractor status instead of the lens of employer control. In reverting back to the pre-FedEx Home Delivery era, this was seen as a return to a more employer-friendly test.

Likely the result of a shift back to a Democratic administration, the NLRB is now asking for public comment as to whether it should change the test yet again. It is asking for feedback on two questions: 1) Should the Board adhere to the independent-contractor standard in SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019), and 2) If not, what standard should replace it?  Should the Board return to the standard in FedEx Home Delivery, 361 NLRB 610, 611 (2014), either in its entirety or with modifications?

If the NLRB decides not to adhere to SuperShuttle, it is possible that some will attempt to push the NLRB to adopt California’s ABC test. Indeed, there have been recent efforts to legislate this into federal law. It is imperative that the NLRB not decide to follow this test, which was adopted by the California Supreme Court in Dynamex. The ABC test has caused an upheaval in California’s economy, with many workers and industries seeking exemptions from AB 5, the 2019 bill that codified the test in law. AB 5’s now more than 100 one-off exemptions demonstrates that even its supporters acknowledge it is not appropriate for every industry. If the NLRB were to adopt it, as in California we would be sure to see industries begging lawmakers for exemptions and Congress picking and choosing which to pass. California’s experience should serve as a warning to the NLRB as it considers which test to apply.  

Ashley Hoffman, Policy Advocate