The National Labor Relations Act (“NLRA”)’s labor protections only extend to employees and explicitly exclude independent contractors. But how to define an “independent contractor” has been the subject of much debate. Most recently the National Labor Relations Board (“NLRB”) has released a decision, Atlanta Opera, Inc., overruling a prior NLRB decision and thereby returning to an older standard for determining independent contractor status.

What is the NLRB?

Passed in 1935, the NLRA established the NLRB, an independent federal agency that protects employees from unfair labor practices and protects the right of private sector employees to join together, with or without a union, to improve wages, benefits, and working conditions. The NLRB is governed by a five-person Board and a General Counsel. The Board has five Members and primarily acts as a quasi-judicial body in deciding cases on the basis of formal records in administrative proceedings. Board Members are appointed by the President with Senate consent.

Besides creating the NLRB, the NLRA contains provisions that protect employees’ right to organize. Principal among these provisions is Section 2(3) of the Act (29 U.S.C. §152 (3)), which excludes independent contractors from enjoying NLRA’s protections. Under the NLRA, “[t]he term ‘employee’ shall include any employee . . . but shall not include . . . any individual having the status of an independent contractor. . . .”

History of the Independent Contractor Test

Any discussion of an “independent contractor” test will begin with the Supreme Court’s decision in NLRB v. United Insurance Co. of America (1968) 390 U.S. 254 [88 S.Ct. 988, 19 L.Ed.2d 1083]. This case definitively settled that “there is no shorthand formula or magic phrase that can be applied to find the answer [of what is an independent contractor], but all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.” [Emphasis added.]

United Insurance admonished the NLRB from focusing too much on one factor when deciding whether an individual should be classified as an employee or independent contractor under the NLRA. Instead, the Supreme Court held that the totality factors, based in common law, should guide the NLRA’s determination. The Supreme Court has been guided by a 10-factor test from the Restatement (Second) of Agency § 220 (1958) to determine whether an individual is an independent contractor or employee. These factors are:

(a) the extent of control which, by the agreement, the master may exercise over the details of the work;

(b) whether or not the one employed is engaged in a distinct occupation or business;

(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;

(d) the skill required in the particular occupation;

(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

(f) the length of time for which the person is employed;

(g) the method of payment, whether by the time or by the job;

(h) whether or not the work is a part of the regular business of the employer;

(i) whether or not the parties believe they are creating the relation of master and servant; and

(j) whether the principal is or is not in business.

In Roadway Package Sys., Inc. (1998) 326 NLRB 842, the NLRB’s modern case concerning the definition of an independent contractor, the entire Board unanimously endorsed the open-ended multi-factor test. This case followed the Supreme Court’s United Insurance decision by analyzing a broad set of factors and not giving more weight to any one factor.

However, a decade later the D.C. Circuit Court held in FedEx Home Delivery v. N.L.R.B., (D.C. Cir. 2009) 563 F.3d 492 (FedEx I), that the Board’s law has “over time, shifted away from the unwieldy control inquiry in favor of a more accurate proxy: whether the putative independent contractors have significant entrepreneurial opportunity for gain or loss.” [Internal quotations omitted.] The D.C. Court was essentially saying that the Board had been incorrectly highlighting control over how one’s own work is done as the most important factor.

In Atlanta Opera Inc., the Board explains how the D.C. Circuit Court’s analysis of the Board’s law was inaccurate. First, the Board determined it had never treated control as the most important factor, and thus it was wrong to implement any sort of shift away from that factor to entrepreneurial opportunity as a main factor. Second, in reviewing the Board’s own decisions, it was concluded there was never such a shift: different factors were evenly weighed, with no one factor carrying more weight.

The Board tried to reject the D.C. Circuit’s analysis by issuing its decision in FedEx Home Delivery (2014) 361 NLRB 610 (FedEx II). “The Board’s subsequent decision in FedEx II was a direct response to the District of Columbia Circuit’s misperception that the Board had already adopted a new approach, and to the Circuit’s endorsement of that supposed shift.” In this case, the Board restated and refined its approach to the independent contractor question by reaffirming that it would be guided by the common-law factors being weighed evenly. The Board rejected the DC Circuit’s FedEx I decision and tried to go back to the United Insurance analysis.

But less than five years later, the Board—now made up of different members—released its decision in SuperShuttle DFW, Inc. (2019) 367 NLRB No. 75. This case returned to FedEx I’s test and made it controlling precedent: the Board would going forward “evaluate the common-law factors through the prism of entrepreneurial opportunity” whenever the facts of a case call for determining if an individual is an employee or independent contractor. To justify its decision to have entrepreneurial opportunity be the main factor of the independent contractor determination, the Board described how control over the details of work and entrepreneurial opportunity are “two sides of the same coin: the more of one, the less of the other. Indeed entrepreneurial opportunity often flowers where the employer takes a ‘hands off’ approach.” This was the independent contractor test until it was overruled in June 2023 by Atlantic Opera Inc.

Atlantic Opera Inc. and the Return to Common Law Principles

In Atlantic Opera Inc., the Board addressed the question of whether makeup and wig stylists working for Atlantic Opera Inc. should be considered employees or independent contractors. It rejected SuperShuttle and returned to the precedent set forth in FedEx II.

Figure 1. Cobb Energy Performing Arts Centre, home of the Atlanta Opera Company. Source.

In returning to the FedEx II standard, requiring equal weight ne placed on each of the common-law factors, the Board pointed out why the SuperShuttle decision was at odds with Supreme Court precedent and the common law. The Board writes that the SuperShuttle Board “tried, and failed, to have it both ways: it could not claim fidelity to both the common-law test and the [D.C. Circuit’s FedEx I decision], which departed from the traditional test.” In other words, the current Board reasoned that the prior SuperShuttle Board could not claim to follow the traditional test, which treats factors as equal, while at the same time viewing those factors through the lens of entrepreneurial opportunity. “. . . . SuperShuttle offered precisely the kind of ‘shorthand formula’ the Supreme Court has cautioned the Board not to adopt.”

The Board also points out that there is not enough support to suggest that entrepreneurial opportunity—or any other singular factor—should be the main focus when determining independent contractor status. “Contrary to the SuperShuttle Board’s assertion, the Board has never afforded special weight or significance to ‘entrepreneurial opportunity,’ nor has it treated it as a trump card, as erroneously suggested by the District of Columbia Circuit in FedEx I.”

And so the test for determining independent contractor status is once again the consideration of factors based in common law, including the ten factors from the Restatement (Second) of Agency § 220. The Board proceeded to apply the multi-factor test to the facts of this case to determine if the makeup and wig stylists are independent contractors or employees of Atlanta Opera Inc.

In this case, makeup and wig stylists worked under the direction of a makeup and wig department head before and during each performance. Atlanta Opera Inc. would stage at least four different productions each season, running from the fall through spring. The stylists were not promised employment between each season, or even from one production to the next. Instead they would be hired by the makeup and wig department head for each individual production and were paid on an hourly basis. The stylists entered into oral agreements with the opera company to work for a particular production. The stylists were not allowed to subcontract their position or find a replacement if they were not able to work during a show. The opera company provided makeup, workspace, wigs, and brushes for each stylist. The stylists were only required to be skilled enough in the niche area of stage makeup to execute the director’s creative vision. The department head reviewed the stylists’ work to ensure it fit with the creative direction and that the director’s notes on the makeup and wigs were never disregarded by the department head or the stylists.

The Board went through the factors from the Restatement (Second) to reach their conclusion that the stylists are employees of Atlanta Opera Inc.

(a) Extent of Control by Employer

This factor weighed in favor of employee status because the stylists had to follow the director’s artistic vision and had no control over the time of work or who could step in for them if they were absent. They were expected to be present at every performance and certain rehearsals and remain on site until the end of performances.

(b) Whether or Not Individual Is Engaged in a Distinct Occupation or Business

This factor weighed in favor of independent contractor status because the stylists had skill and training in a particular area—stage makeup—and the opera company hired them to work in that niche capacity. However, the stylists were fully integrated in the opera company’s productions and worked in tandem with other departments. As such, this factor weighs slightly in favor of independent contractor status.

This factor weighs in favor of employee status because the stylists had to follow the director’s artistic control. “Although stylists perform their manual hair, wig, and makeup work largely free from the Employer’s immediate oversight, they exercise only negligible discretion in completing the details of their work.” The director did not scrutinize the technical details of the stylists’ work, but they were expected to comply with the director’s wishes. The director made the creative decisions and gave the stylists notes on how to achieve the its vision. Importantly, the stylists never disregarded the director’s notes. The stylists were supervised in that their adherence to the artistic direction was monitored and corrected.

(d) Skill Required in the Occupation

This factor weighs in favor of contractor status because the stylists had specialized skills in stage makeup and wigs. The Board has noted that “specialized skillsets in similar creative contexts are indicative of contractor status.” The Board notes that the stylists invested personal time and money to achieve their level of proficiency in stage makeup and wigs, and even participated in continuous learning and training programs in this field.

(e) Whether the Employer or Individual Supplies Instrumentalities, Tools, and Place of Work

This factor weighs in favor of employee status because Atlanta Opera provided the stylists with workspace and tools necessary for their work. The opera company supplied makeup and wigs to each stylist, in addition to makeup benches and places to store the wigs when not in use. “In an employer-employee relationship, the employer generally supplies the instruments and tools of work.”

(f) Length of Time for Which Individual is Employed

This factor weighs in favor of independent contractor status because the stylists were hired to work on a single-production basis rather than an ongoing basis—there was no indication that the stylists expected continuous or future employment. The stylists did not commit to working for the opera company beyond the production they were hired to work on. “The Board has found that this factor weighs in favor of the contractor status where workers used on ‘project basis rather than for an indefinite time period,’ may decline future work, and routinely work for other companies.”

(g) Method of Payment

This factor weighs in favor of employe status because the stylists worked on an hourly pay structure with the possibility of overtime. In the past, the Board has found that the absence of benefits may be indicative of contractor status. “But in Lancaster Symphony—a case with multiple parallels to this one—the Board found that the method of payment factor weighed in favor of employee status where the payment scheme for musicians approximated an hourly wage, even though the employer did not deduct payroll taxes or provide fringe benefits.” As such, this factor weighs in favor of employee status.

(h) Whether or Not Work Is Part of the Regular Business of the Employer

This factor weighs in favor of employee status because the Atlanta Opera’s “regular business is to stage operas, and stylists perform a function—providing makeup, hair, and wig treatments to onstage performers—that is integral to that endeavor. . . .” This supports employee status because an employer must hire employees to complete its regular business, as compared to independent contractors who are hired to do something adjacent to the regular business. An example would be a furniture repair company hiring seamster to sew fabrics compared to a roofer to fix a leaky roof in the workshop.

(i) Whether or Not the Parties Believe They Are Creating an Independent Contractor Relationship

This factor is inconclusive because the stylists entered into informal oral agreements to work for the opera company. The oral agreements did not specify the relationship between the company and the stylist. Accordingly this factor is inconclusive.

(j) Whether the Principle Is or Is Not in Business

This factor weighs in favor of employee status because the employer is in the business of staging productions. “The stylists play an essential role in facilitating the experience that the Employer provides to the audiences.”

On balance, the Board found that Atlanta Opera Inc. failed to show that its stylists were independent contractors and that they should more properly be considered employees. Therefore the stylists are under the protection of the NLRA and will be able to organize under the NLRA.

Conclusion

Via the Atlanta Opera Inc. decision, the NLRB has now returned once again to the common law factors to determine independent contractor status. This decision currently supplants the test that formerly placed greater weight on the entrepreneurial opportunity for gain or loss available to the employee. The well-known common law factors that formerly governed the analysis will once again each be weighed evenly when determining whether a worker is an employee or independent contractor for purposes of the NLRA.