The NLRB Rejects a Trump-Era Definition of "Employee"

On June 13, 2023, in The Atlanta Opera, Inc. and Make-Up Artists and Hair Stylists Union, Local 798, IATSE, Case 10-RC-276292, the National Labor Relations Board ("the Board") revisited its approach to assessing whether workers are employees covered by Section 2(3) of the National Labor Relations Act ("the Act"), or independent contractors excluded from the Act's coverage. So doing, the Board rejected an approach adopted by the Board during the Trump presidency in SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019), which repudiated the approach that the Board had followed since 2014, as articulated in FedEx Home Delivery, 361 NLRB 610, slip opinion at 12 (2014), and instead purportedly returned "the Board's independent contractor test to its traditional common-law roots." Essentially, in FedEx Home Delivery, the Board elevated the "entrepreneurial opportunity" element, just one of the factors previously considered when conducting the analysis, over all other elements, stating that this element "is a principle by which to evaluate the overall effect of the common-law factors on a putative contractor's independence to pursue economic gain." Id., slip opinion, at 9.

In Atlantic Opera, the Board explained that the approach adopted in FedEx Home Delivery cannot be "squared with board precedent, with the common law, or with Supreme Court precedent." The Board further iterated, "[i]ndeed, any approach that purports to elevate a single factor or designate an animating principle necessarily runs counter to the Supreme Court's admonition that '[t]here is no shorthand formula or magic phrase that can be applied to find the answer, but all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.'" Id., slip opinion at 1 (quoting NLRB v. United Ins. Co. of America, 390 U.S. 254, 258 (1968). Applying the reinstated standard articulated in FedEx Home Delivery, the Board found that the workers at issue, makeup artists, wig artists, and hairstylists, who worked at the Atlanta Opera house, were employees under Section 2(3) of the Act and not independent contractors. FedEx Home Delivery, slip opinion, at 2.

Following Atlantic Opera, when determining if a worker is an employee or an independent contractor, the Board will apply the list of factors identified in Section 220 of the Restatement (Second) of Agency, comprised of factors (a) - (j). Id. slip opinion, at 2, 12. With respect to "entrepreneurial opportunity," the Board clarified that this factor is just one of the factors to be considered and, when so doing, "the Board also considers whether the evidence tends to show that the putative independent contractor is, in fact, rendering services as part of an independent business." The Board also exokauned that it "should give weight only to actual (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." slip opinion, at 12. By following this approach, the Board now precludes employers from relying on a theoretical "entrepreneurial opportunity" to classify workers entitled to protection under the Act as independent contractors, and thereby evade all employer obligations