HR and Small Business Groups Ask the NLRB to Keep Independent Contractor Standard

The National Labor Relations Board is weighing 2 options: whether it should maintain the current independent contractor test established during the Trump Administration, or return to a previous standard.

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HR and Small Business Groups Ask the NLRB to Keep Independent Contractor Standard

Groups representing HR pros and small businesses have asked the National Labor Relations Board to keep its current standard for determining worker classification.

The Board is considering whether it should maintain the current test established during the Trump Administration or return to a prior standard. The current test emphasizes “entrepreneurial opportunity.” The previous test focused on the amount of control exercised over the worker.

The Board adopted the current legal standard in 2019 in SuperShuttle DFW, Inc. The decision overruled the standard adopted 5 years earlier during the Obama Administration in FedEx Home Delivery. The Trump era standard is regarded as employer-friendly, while the Obama-era standard is regarded as employee-friendly. With a Democratic majority in place, the Board is taking another look at the issue. It asked for public comments in December 2021 on what standard to use.

The issue of worker classification has taken on even more urgency with the rise of the gig economy. The nation’s fastest-growing companies lean toward classifying workers as independent contractors, not employees.

About 42 briefs were filed. Arguments ranged from keeping the current test to returning to the previous test to adopting a completely new standard.

The current test emphasizes “entrepreneurial opportunity.” The previous test focused on the amount of control exercised over the worker.

Keep the current standard

The National Federal of Independent Business (NFIB), an association of small business owners, asked the Board to keep the current standard.

“Small business owners are better able to comply with various rules and regulations when government agencies provide clear and consistent guidance,” Karen Harned, Executive Director of NFIB’s Small Business Legal Center, said in a statement.

“Unfortunately, independent contractor rules have been neither clear nor consistent, confusing many owners on how best to comply,” Harned continued.

NFIB argued in its brief that:

  • Overruling the current independent contractor standard is not permitted by statute or judicial authority
  • Overruling the current standard will harm the regulated community and damage the Board’s integrity
  • Returning to the more stringent standard would be bad public policy
  • A return to the former standard is based on the false premise that independent contractor status should be disfavored

The groups that signed onto the NFIB brief include the HR Policy Association, American Bankers Association, and National Retail Federation.

The Society for Human Resource Management (SHRM) also asked the Board to preserve the status quo. In reporting on the arguments made in its brief, SHRM noted that “the test makes sense and follows the natural understanding of what it means to be an independent contractor.”

The U.S. Chamber of Commerce also argued for continued adherence to the current standard. It Chamber said in its brief that “reversing SuperShuttle after only 3 years would exacerbate stakeholder uncertainty and undermine agency credibility.”

The Marketplace Industry Association, a trade association representing digital marketplaces, also asked the Board to stick with the existing standard. The Board should continue to give weight to potential entrepreneurial opportunity, the organization argued.

Groups representing freelancers, including writers and editors, also urged the board to keep its current framework.

Get rid of the current standard

However, Rideshare Drivers United asked the NLRB to adopt a standard “unambiguously” recognizing that gig economy workers are employees. The organization represents 20,000 California-based drivers for Uber Technologies, Lyft Inc, and other app-based drivers.

The United States Justice Department’s suggested an “up-to-date, consistent approach to worker classification that adequately protects workers’ rights to organize.” The agency noted the labor market is going through “substantial disruption” that includes the rise of the gig economy.

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The dispute

The Board considers a variety of factors derived from the Restatement (Second) of Agency, a legal treatise, to determine worker classification.

The Board considers a variety of factors derived from the Restatement (Second) of Agency, a legal treatise, to determine worker classification.

The latest dispute revolves around how much significance to give to a worker’s entrepreneurial opportunity for gain or loss. Hunton Andrews Kurth LLP attorneys Robert T. Dumbacher and Stephen P. Kopstein have noted that although the element isn’t specifically mentioned in the Restatement, the Board has traditionally considered it when examining worker status.

The Board gave the factor greater weight in SuperShuttle DFW in 2019 than it did in FedEx Home Delivery in 2014. This caused more workers to be classified as independent contractors, the attorneys said.

Deciding that FedEx Home Delivery had “impermissibly diminished the significance of entrepreneurial opportunity,” the Board agreed in SuperShuttle with a court case from the D.C. Circuit that in recent times entrepreneurial opportunity had become the primary prism through which the NLRB would look to determine independent contractor status rather than employer control.

HR wants clarity, turns to freelancers for expertise

HR professionals have indicated they want to get rid of the ambiguity that can surround the hire of independent contractors. The main concern about freelancers, expressed by HR professionals in a 2019 SHRM and SAP SuccessFactors survey, is the need for a clear standard.

SHRM’s research also found that businesses turn to freelancers for access to specialized talent with specific skills or expertise (48%) and staffing specific projects and initiatives (48%) rather than as a cost-saving measure. Less than 20% of HR professionals said their organization used freelancers to save money.

Feds going after worker classification

Earlier this year, the NLRB and the U.S. Department of Labor announced they will be collaborating in a new effort aimed at improving compliance with the laws they enforce. They specifically mentioned unlawful pay practices and misclassification of workers as independent contractors as areas that will be under scrutiny.

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