On August 12, 2021, the National Labor Relations Board (NLRB) issued a significant ruling in the Atlanta Opera case, overturning its previous standard for classifying workers as “independent contractors” or “employees” under the National Labor Relations Act (NLRA). The decision has significant implications for businesses and workers across the United States, particularly those that rely on independent contractors as part of their business model.
The National Labor Relations Act (NLRA) is a federal law that guarantees workers the right to unionize, engage in collective bargaining, and take other collective actions to improve their working conditions and benefits. The law applies to most private-sector employers and their employees.
The Atlanta Opera case involved a group of makeup artists, wig artists, and hairstylists who worked at the Atlanta Opera. The NLRB Board majority determined that these workers were not independent contractors but instead were “employees” under the NLRA.
For decades, the NLRB has used a multifactor common-law test to determine whether a worker is an “independent contractor” exempt from the NLRA’s protections or an “employee” entitled to those protections. The test considers factors such as the worker’s level of control over their work, the degree of skill required to perform the work, and the extent to which the worker is economically dependent on the employer.
Employer’s right to exercise control over worker
When applying these factors, the Board and courts have traditionally focused on an employer’s right to exercise control over the worker. Specifically, they have looked at which “controls” companies can use without transforming a contractor into an employee.
Facts of FedEx I
In 2014, the NLRB applied this test in the case of FedEx Home Delivery, in which it found that a group of drivers working as contractors were actually “employees” under the NLRA. The board concluded that FedEx exercised significant control over the drivers, including setting their work schedules, providing them with training and equipment, and requiring them to follow specific policies and procedures.
Overruling of SuperShuttle and reinstatement of FedEx II standard in Atlanta Opera
In 2019, the Board established a new standard in the case of SuperShuttle DFW, Inc., which emphasized the importance of “entrepreneurial opportunity” when determining whether a worker is an independent contractor. The Board held that the existence of such an opportunity is “an important animating principle by which to evaluate” the common-law factors.
At the Atlanta Opera, the board majority overruled SuperShuttle and reinstated its previous standard from FedEx II. This standard places greater emphasis on an employer’s right to control the worker rather than the worker’s opportunity for entrepreneurial activity.
In dissent from the Atlanta Opera majority decision, member Kaplan argued that the majority’s decision conflicted with D.C. Circuit precedent and that the Board could have found that the hair stylists, makeup artists, and wig artists were “employees” under the NLRA without overruling SuperShuttle.
Implications for businesses and workers
The NLRB’s decision in Atlanta Opera could have far-reaching implications for businesses that rely on independent contractors as part of their business model. Companies that view their workers as being outside the scope of the NLRA could become vulnerable to union organizing and unfair labor practice charges.
Furthermore, the decision may result in increased unionization efforts and demands for collective bargaining by workers who are now categorized as “employees” under the NLRA. Businesses may also face legal challenges from workers seeking back pay, benefits, and other compensation that they would have been entitled to as “employees” under the law.
The NLRB’s ruling in Atlanta Opera creates a new level of complexity for businesses that regularly use independent contractors as part of their business model. Companies must now carefully evaluate their relationships with contractors to determine whether they are correctly classified under the NLRA and other labor laws. Failure to do so can result in legal and financial consequences that can have a significant impact on a business’s bottom line and reputation.