NLRB Returns to Common Law Standard for Classifying Independent Contractors

Author: Robert S. Teachout, XpertHR Legal Editor

January 28, 2019

A new National Labor Relations Board (NLRB) decision has restored the standard for determining independent contractor status to one based on the traditional common-law test. In its decision, the NLRB emphasized the role that a worker's entrepreneurial opportunities play in determining independent contractor status.

SuperShuttle DFW, Inc. and Amalgamated Transit Union Local 1338 examined whether a group of franchisees who operate shared-ride vans are employees under the National Labor Relations Act (NLRA) or independent contractors. Before 2005, the company considered the drivers to be employees. But that year, SuperShuttle DFW switched to a franchise model, and the drivers sought to organize a bargaining unit.

The NLRB held that the franchisees' ownership or leasing of their work vans, ability to set their own hours and working conditions and the method of compensation provided the franchisees with significant entrepreneurial opportunities for economic gain. The decision affirms a regional director's finding that the franchisees are independent contractors and not statutory employees covered under the NLRA.

The ruling overturns the 2014 FedEx Home Delivery decision that modified the independent contractor test by limiting the weight given to a worker's entrepreneurial opportunity for economic gain when evaluating various factors. In that decision, the Obama-era labor board declined to adopt a DC Circuit Court of Appeals holding that called the consideration of entrepreneurial opportunity an "animating principle" of the NLRB's independent-contractor status determination.

Board member Lauren McFerran, the sole Democrat on the board, dissented from the ruling, saying that the majority's independent contractor test "ignores the common law, the goals of the NLRA, and the realities of the workplace to remove workers from labor law protections." She further commented on Twitter that calling employees "franchisees" or "business owners" does not change the reality of their circumstances or make them less entitled to NLRA protections.