Another Obama-Era NLRB Precedent Bites the Dust: A Swing Back Toward the Importance of “Entrepreneurial Opportunity” in Independent Contractor Analysis
February 5, 2019
On January 25, 2019, the National Labor Relations Board (“NLRB”) issued its decision in SuperShuttle DFW, Inc. and Amalgamated Transit Union, overturning the Obama-era decision in FedEx Home Delivery, which downplayed the role of entrepreneurial opportunity in the test to determine whether individuals are independent contractors.
The National Labor Relations Act (“NLRA”) only applies to employees, and expressly excludes independent contractors from its coverage. The NLRB and reviewing courts had long applied a traditional common law agency analysis to determine whether individuals were independent contractors, and emphasized an employer’s ability to control the work as the most important factor. In 2009, however, the United States Court of Appeals for the District of Columbia Circuit overturned an NLRB decision holding that FedEx drivers were employees under the NLRA. In that case, the court relied heavily on whether the driver’s position “present[ed] the opportunities and risks inherent in entrepreneurialism,” rather than whether FedEx, as the employer, had the ability to control the work being performed. While the court considered all factors of the traditional common-law analysis, it held that “entrepreneurial opportunity” was the predominant factor. Pursuant to that analysis, the court found that the drivers had entrepreneurial opportunity to establish their own hours and work routes, and to use their vehicles for personal use, and, therefore, were independent contractors under the NLRA.
In 2014, the NLRB revisited the issue in FedEx Home Delivery, 361 NLRB 610, at which time the NLRB significantly limited the importance of entrepreneurial opportunity to just “one aspect” of a new factor of “rendering services as part of an independent business.” This move away from entrepreneurial opportunity concerned the current Republican-majority NLRB, and on January 25, 2019, it seized the opportunity to reevaluate the appropriate test for determining independent contractor status in SuperShuttle DFW, Inc.
In SuperShuttle DFW, Inc., the NLRB overturned the 2014 FedEx case, finding that the decision inappropriately altered the independent contractor analysis and improperly limited the importance of entrepreneurial opportunity. The NLRB returned to its more traditional independent contractor analysis, which requires consideration of all common-law agency test factors in the context of entrepreneurial opportunity, in the same way the NLRB traditionally had evaluated employer control. In this context, the NLRB noted in SuperShuttle DFW, Inc. that, where “a qualitative evaluation of common-law factors shows significant opportunity for economic gain (and concomitantly, significant risk of loss),” an individual is likely to be deemed an independent contractor. Applying the common-law factors through this “prism” of entrepreneurial opportunity, the NLRB found that the drivers at issue in SuperShuttle were independent contractors, rather than employees, and exempt from coverage under the NLRA.
The impact of the NLRB’s return to traditional common law agency analysis, viewed through the “prism of entrepreneurial opportunity,” is likely to ripple throughout the growing “gig economy,” where increasingly employers have been moving toward the use of independent contractors for many services, and away from a more traditional employment model.