It is common for an organization to wonder if their worker classifications are as employees or an independent contractors, especially with the recent trend of remote workers. It’s critical for employers to be correct, for not doing so can have costly implications for the organization and the worker. Wrongly classifying workers as independent contractors can open the door for them to claim past wages, including overtime and the value of benefits that had not been provided. Classifying a worker as an independent contractor means the person did not have protections of federal law, such as minimum wage and overtime earnings, the right to unionize or form a union, nor file unfair labor practices, and other benefits. Each case can be different, but misclassification can be costly.
History of NLRB Worker Classifications
For the last few years, since the Super Shuttle case, the National Labor Review Board (NLRB) guidance has been to weigh ‘entrepreneurial opportunity’ and the worker’s ‘ability to pursue economic gain’ as greater factors amongst a list in determining if someone is an independent contractor or an employee. Yet, this did not align with the NLRB’s precedent direction, the common law of the USA, or with the US Supreme Court’s opinion in their 1968 decision in NLRB vs. United Insurance Co of America. In those previous cases and subsequent guidance, no single factor outweighed others. After further review, several weeks ago in June, in deciding a more recent Atlanta Opera case, the NLRB overruled its prior guidance and reinstated its traditional standard.
The reinstated list of factors in determining whether a person is an independent contractor or an employee includes considerations such as:
- The extent of control over the details of the work
- Whether or not one is engaged in a distinct occupation or business
- The kind of occupation, its locality, and if done under the direction of the employer or supervision
- The skill required
- Who supplies the instruments, tools, and place of work for the person to do the job
- The length of time the person is employed
- The method of payment, whether by time or by job
- Whether or not the work is a part of the regular business of the employer
- Whether or not the parties believe they are creating an employer/employee relationship
- Whether or not the person is or is not in business
A company and a worker must consider the total weight of the above elements. If any employer has, within the last few years, become accustomed to weighing one or a few of the elements over the others, they should re-evaluate. This recent NLRB decision places all the factors back to being equally important.
What the DOL Says about Worker Classifications
Similarly, the Department of Labor (DOL) is also reviewing its ruling on who is an employee under the Fair Labor Standards Act (FLSA). The ruling is not out yet, but the proposed rule could be whereby ‘control over the work’ and ‘opportunity for profit and loss’ may no longer be weighed more heavily than other factors.