NLRB Alters Key Component of Independent Contractor Test

October 10, 2014

The National Labor Relations Board continues to seek new limits on work arrangements outside the traditional employment relationship, issuing a ruling that gives short shrift to whether a putative "independent contractor" has the ability to work for other companies, something that historically has been a key determining factor.  In determining whether a worker is, in reality, an employee rather than an independent contractor, the Board considers a number of factors but, where the individual has "significant entrepreneurial opportunity" to work for others, hire their own employees and "have a proprietary interest in their work," these facts have been given considerable weight towards finding that she or he is, in fact, an independent contractor.  Last week, the Board generally downplayed this factor in finding, by a vote of 3 to 1, a group of drivers to be employees of a logistics company.  In a strong dissent, Republican Member Harry I. Johnson, III, described the decision as:

A sharp departure from precedent by diminishing the significance of the entrepreneurial opportunity factor to the point where it will rarely be considered as among the decisive factors in determining independent-contractor status.  My colleagues have made entrepreneurial opportunity a mere subfactor in their analysis.  This gives short shrift to what should be an "animating principle," especially entrepreneurship—a form of economic opportunity that most believe marks a clear dividing line between operating one's own business and merely performing a work assignment.