A recent ruling from the National Labor Relations Board (“NLRB”) provides further grounds for employers to carefully consider how they classify their workers as employees or independent contractors.
In this matter, a group of makeup artists, wig artists, and hairstylists working for the Atlanta Opera petitioned the NRLB to grant them union representation, a benefit only offered to employees. The NRLB was left to decide whether the workers should be considered employees or independent contractors. Traditionally, independent contractors are entitled to greater flexibility in their job duties, but independent contractors also have fewer rights under state and federal law, including wage, discrimination, and union protections.
Previously, the NLRB’s independent contractor test turned on whether the workers had “entrepreneurial opportunity for gain or loss.” The NLRB argued that the prior test did not protect the Opera workers because they did not have alternative entrepreneurial opportunities. After all, there were no other operas within the city to share their talents.
The NRLB’s new test still considers entrepreneurial opportunity, but balances that factor against a list of traditional common-law factors. These common-law factors include:
- The extent of control the employer exercises over the details of the work;
- Whether the work is usually done under the direction of the employer or without supervision;
- Whether the worker is engaged in a distinct occupation or business;
- How much skill is required in the particular occupation;
- Whether the employer supplies the tools and the place of work;
- The length of time for which the worker is employed;
- The method of payment, whether by the hour or by the job; and
- Whether the work is a part of the regular business of the employer.
The NRLB states the purpose of the new independent contractor test is to “ensure that workers who seek to organize or exercise their rights under the National Labor Relations Act (NLRA) are not improperly excluded from its protections.” The ruling prevents employers from evading union protections by classifying their workers as independent contractors.
But for many businesses, this ruling means potential financial fallout. Many employers use the independent contractor classification for legitimate business purposes, such as limited liability, staffing flexibility, and tax advantages. And, many workers prefer being classified as independent contractors for many reasons, including greater flexibility. Closing the curtain, even just slightly, on the independent contractor classification means some employers will have to transition independent contractor workers into employee positions.
The immediate response to the NRLB decision is mixed. Some legal professionals have said the decision is merely a low-impact update, while others have argued that the decision tightens the reins on businesses and limits businesses from engaging in advantageous hiring practices. Regardless, it is a reminder for all employers to carefully review how they classify their W-2 employees and 1099 independent contractors.
If you need more guidance or information, contact the employment law attorneys at General Counsel, P.C. today at 703-556-0411, intake@gcpc.com, or use this Contact Us Form. Attorneys at General Counsel, P.C. specialize in labor and employment law and have experience working with businesses, non-profits, and individuals throughout the DC Metropolitan area and across Virginia, specifically in Fairfax County, Arlington, and Loudoun County.