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NLRB Overturns 2014 Independent Contractor Test

    Client Alerts
  • February 04, 2019

In a decision with major implications for companies in the “gig economy,” on January 25 the National Labor Relations Board reversed an Obama-era case that established a tougher test for companies to contend that their workers cannot unionize because they are independent contractors and not employees. The 2014 decision, FedEx Home Delivery, established an “economic realities” test that looked at the dependence of the workers on the company to determine their status.

In a 3-1 decision in SuperShuttle DFW, Inc., the NLRB explicitly reversed FedEx Home Delivery in favor of a legal standard that relies on the previous common law distinction between employees and contractors, but that emphasizes entrepreneurial opportunity as a guide for making the legal determination. In this case, the workers seeking to unionize had relatively low-level driving jobs and were subject to significant conduct rules, all indicia of employment. However, the board majority noted that each worker owned his or her own franchise and vehicle, set their own hours and routes, and bore the risk of profit or loss depending on how they structured their businesses. This risk entailed the entrepreneurial opportunity noted by the board as an overarching criteria in its analysis.

Based on this decision, workers for Uber, Lyft, and other gig economy businesses will have a significantly harder time unionizing. This new NLRB decision appears to provide these companies with a roadmap for structuring their worker relations in such a way to avoid claims, at least for NLRA purposes, that they are actually employees subject to federal legal protections.