The National Labor Relations Board (NLRB) has made a recent decision that changes how workers are categorized as employees or independent contractors under the National Labor Relations Act (NLRA). Find out if you’re a freelancer being misclassified, or make sure your employees are classified correctly if you’re a a small business owner.
Previously, during former President Trump’s administration in 2019, the NLRB had modified the criteria for determining whether a worker is an independent contractor or an employee. However, the NLRB has now reversed that definition and returned to the classification system that was in place before those changes. The former ruling by the NLRB, which was influenced by President Trump’s appointees, introduced a new standard that focused on “entrepreneurial opportunity” to determine if a worker should be classified as an independent contractor or an employee. The emphasis was placed on the level of entrepreneurial opportunity available to the worker, as it was seen as an indication of the employer’s control.
However, the NLRB’s recent decision overturns the 2019 ruling and reinstates the previous standard. This ruling clarifies that while entrepreneurial opportunity should still be considered, it is just one aspect of a broader multi-factor test. No single factor holds decisive weight in determining worker classification.
Under the new/old system, the NLRB uses a test that considers 13 different factors to determine the nature of the relationship between the employer and the worker. Each factor, when considered individually, may not provide a definitive answer, but when evaluated together, they help determine the level of control the employer has over the worker, including if the worker is considered an employee or an independent contractor. The various factors for the test are:
1. The duration of the relationship between the parties;
2. How much discretion the worker has over when and how long to work;
3. The worker’s role in hiring and paying assistants;
4. The employer’s right to control the manner and means by which the work is accomplished;
5. The location of the work;
6. The method of payment;
7. The skill level required to complete the job or services;
8. Who provides the tools and equipment to complete the job;
9. How the employer reports payment of workers’ compensation for tax purposes;
10. Whether the employer is in business;
11. Whether the employer provides employee benefits to the worker;
12. Whether the employer has the right to assign additional projects to the worker; and
13. Whether the work is part of the employer’s regular business.
This change in interpretation suggests that there is now a higher chance of workers being classified as employees, which grants them protections provided by the NLRA, including the right to unionize. The NLRB’s decision aligns with its recent trend of making rulings that favor employees, which has been observed under the administration of President Biden.
If you are an employer or small business owner who hires independent contractors, make sure to review your working relationships to ensure they comply with the updated standard.
Additionally, if you’re a freelancer and feel you’re being misclassified, or that you’re working as an employee while being paid as an independent contractor, don’t hesitate to reach out to us via email at [email protected]