Changes are on the horizon as the NLRB (National Labor Relations Board) considers redefining “independent contractor.” Read on to find out if this action could affect you.
At Gardner Employment Law, we stay current on federal and state regulations to keep our clients informed. If you need advice on employment law, especially if you’re an independent contractor, give us a call.
How Is the NLRB Considering Changes to the Independent Contractor Definition?
The NLRB may return to its 2014 definition of independent contractor that emphasizes “entrepreneurial opportunity” as a primary factor. This factor examines the extent to which a worker can accept business opportunities with a flexible schedule.
This potential change arose from a situation at the Atlanta Opera where makeup artists and hair stylists sought to unionize in order to obtain group health insurance. The Atlanta Opera claimed that the workers were independent contractors, barring them from unionizing. This led to a formal claim filed with the NLRB. The workers won at the lower level, but the Atlanta Opera has appealed. The pending appeal will decide whether the makeup artists, wig artists, and hair stylists are independent contractors or employees of the Atlanta Opera.
In December 2021, the NLRB submitted a brief stating its intention to use this case to reconsider the differences between independent contractors or employees.
The NLRB invited public comment on two matters, based on two landmark cases:
- Whether to overturn the independent-contractor standard established in SuperShuttle DFW, Inc. v. NLRB , and;
- If overturned, whether to return to the standard from FedEx Home Delivery v. NLRB either in its entirety or with modifications.
Now you’re asking: What are those two cases about? In 2014 in the FedEx case, the NLRB took a new approach by introducing the “entrepreneurial opportunity” definition. In 2019, the NLRB returned to the common law factors for defining independent contractors in SuperShuttle DFW. Texas courts generally follow the common law definition.
The Two Concepts Underlying the NLRB’s Intention to Redefine “Independent Contractor”
This “entrepreneurial opportunity” definition brought in by FedEx emphasizes a worker’s ability to maintain a flexible schedule by accepting other business opportunities. With the more recent SuperShuttle case, the standard for an independent contractor became less about entrepreneurial opportunity. Instead, the NLRB returned to the common law understanding, which follows a ten factor test:
- The degree of control which the business owner may exercise over the details of the work;
- Whether or not the worker is engaged in a distinct occupation or business;
- The kind of occupation, including whether the work is usually done under the direction of the employer or by a specialist without supervision;
- The skill required in the particular occupation;
- Whether the employer or worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
- The length of time for which the worker is employed or engaged;
- The method of payment, whether by time or by job;
- Whether or not the work is part of the regular business of the employer;
- Whether or not the parties believe they are creating a master-servant relationship;
- Whether the principal is or is not in business.
It is an employer’s tendency to mischaracterize employees as “independent contractors” that is driving the NLRB’s quest for clarity in its definition of independent contractor. In January 2022, the NLRB signed a partnership agreement with the DOL (Department of Labor). By collaborating with the DOL, the NLRB intends to “enforce workplace protections and combat misclassification, and prevent retaliation against them.” Thus, if an employer has purposefully mischaracterized someone as an independent contractor when the worker is an employee, there will be consequences.
Am I Working as an Employee or an Independent Contractor?
Independent contractors are not employees. Independent contractors do not receive the same benefits as a full time employee does. If you’re an independent contractor, you don’t receive health insurance, retirement savings, and other benefits. Knowing whether you are working as an independent contractor or employee can be crucial to receiving benefits.
Both you and your employer pay taxes differently if you are an independent contractor. We explained in “Independent Contractor vs. Employee” your classification determines how payroll taxes, social security, minimum wage, and overtime are reported and how you are paid. Based on the common law definition, here is a list of the main distinctions between “employee” and “independent contractor.”
|Takes instructions about when, where and how the work is to be performed.||Does the job with few, if any, instructions as to the details or methods of the work.|
|Often receives training.||Does not need or receive any training.|
|Employer provides needed equipment and business expenses.||Furnishes all tools and equipment.|
|Works for one company on a continuing basis.||May work for more than one company.|
|Employer decides the schedule and hours worked.||Decides own hours and when to work.|
|Must devote service to the employer.||Often does work for many companies.|
|Employers withhold employment taxes.||Responsible for all taxable income.|
|File a W-2 with your income tax return.||File a 1099.|
Since your benefits, taxes, and much more hinge on your characterization as an employee or independent contractor, you should be aware of the differences. Some more unscrupulous employers may mischaracterize employed individuals as independent contractors to avoid paying taxes and the obligations of an employer-employee relationship. Contact an employment lawyer to make sure you are not on the receiving end of this deception.
Find Out If You Are An Independent Contractor
Keeping up with the details of one’s employment status in the legal context can require intensive reading. That’s why we do the research for you. We help our clients to navigate the challenges faced in the workplace by arming them with knowledge of their legal rights. If you need help analyzing your employment status, give us a call.