In a key decision for many franchisors and franchisees, and others who rely on independent contractors, the National Labor Relations Board recently reinstated its test for examining contractor status.  In 2014, the Obama-era NLRB, in a case involving Fed Ex delivery drivers, “refined” its test for examining contractor status. The refinement was really a fundamental shift in how the NLRB reviewed these questions, and not surprisingly led to many more findings of employer-employee status.

The “refinement” diminished the importance of the workers’ entrepreneurial opportunities, holding that this question was really a minor part of the overall analysis, thus diminishing its importance greatly.  This question, which often supports a finding of independent contractor status, became much less of a focus for the NLRB.

In SuperShuttle DFW, the Board announced that it was overruling the Obama-era “refinement” and returning to the standard that had been in place for many years.  The NLRB cited years of case law, which held that the entrepreneurial opportunity was actually a key question in the analysis.

The NLRB made clear that it will continue to apply the common law agency test to analyze whether a worker is an independent contractor or an employee.  That test requires examination of a number of factors, including:

• The extent of control exercised over the worker;
• Whether the worker is engaged in a distinct occupation or business;
• The kind of occupation, and whether it is typically performed under supervision;
• The skill required;
• Who supplies the tools and equipment necessary to do the work;
• The length of time the worker is engaged;
• The method of payment;
• The intention of the parties with respect to their relationship; and
• Whether the principal is a business.

The courts and the NLRB have long made clear that all of these factors must be considered and no single factor is controlling.  In addition, the analysis is not quantitative, but is qualitative.  In other words, one cannot simply count up the factors favoring one classification and make a determination. In SuperShuttle, the NLRB confirmed that all of the factors are important and no single factor will end the analysis.

The NLRB then clarified that entrepreneurial opportunity was indeed a key question, and not a sub-factor.  Just like the question regarding the right of control, the opportunity for profit and loss is really an issue that is at the heart of several of the factors.  Many of the factors may or may not demonstrate that the worker has an opportunity to make more money.  The NLRB stated that moving forward, while analyzing each factor, it will continue to ask whether the workers at issue do or do not possess entrepreneurial opportunity.

Where the common law factors demonstrate that the workers in question are afforded significant entrepreneurial opportunity, the NLRB will likely find independent contractor status.

We expect that this holding will return the balance back to the NLRB’s independent contractor analysis, and may help correct some of the more aggressive employer-employee decisions issued under the Obama-era standard.  If you have any questions regarding the status of any worker, please contact any member of our Labor and Employment Group.