NLRB revises independent contractor test

Posted by Charles Middleton on 02/20/2019

The National Labor Relations Board (NLRB) recently overturned a rule revising a classification test regarding independent contractors. What rule was overturned?

In 2014, the NLRB issued a decision that deviated from its long-standing, 10-factor test for determining whether a worker is an employee or an independent contractor for purposes of the National Labor Relations Act. The 2014 decision placed extra emphasis on whether the employer has a right to control the worker’s activities. The decision also introduced a new factor that considered whether the worker was rendering services as part of an independent business. This made it difficult for employers to successfully argue that workers were independent contractors because employers almost always exercise some level of control over contract labor, and the presence of some level of control indicates the worker is not operating an independent business.

What is the new rule?

On Jan. 25, the NLRB reversed its 2014 decision and reverted back to the 10-factor test. The 10 factors are: (1) the extent of control the employer exercises of the details of the work being performed, (2) whether or not the worker is engaged in a distinct occupation or business, (3) the type of occupation involved, and whether the work is usually done under the supervision of an employer or by a specialist without supervision, (4) the level of skill required in the occupation, (5) whether the worker supplies the instrumentalities, tools and place of work, (6) the length of time for which the worker is engaged to work, (7) whether the worker is paid by the time or by the job, (8) whether the work is part of the regular business of the employer, (9) whether the parties believe they are creating an employer-employee relationship, and (10) whether the employer is in business.

How will this affect Oklahoma businesses?

The National Labor Relations Act of 1935 (NLRA) protects the rights of employees to organize for union purposes and prohibits employers from engaging in certain unfair labor practices. The NLRA, however, does not apply to independent contractors. By reversing its 2014 decision, the NLRB has re-leveled the playing field, which had become tilted toward finding that workers should be classified as employees rather than as independent contractors, and restored some clarity into that determination. Businesses must remember, however, that the determination will be made on a case-by-case basis. Additionally, businesses should keep in mind that the NLRB’s decision does not apply to the independent-contractor test used by the U.S. Department of Labor’s Wage and Hour Division or to other state and federal wage and hour laws.

Paula Burkes, Business writer

Published The Oklahoman, February 20, 2019