We continually come across clients who are still confused about using independent contractors. It can be complex. I understand that. There is a vitally important distinction between employees and independent contractors because key employment laws, such as anti-discrimination laws, wage and hour laws and labor laws do not apply to independent contractors.
Previously the National Labor Relations Board significantly limited the coverage of which workers qualify as independent contractor under federal labor laws. At that time, the Board reversed decades of precedent by concluding that workers only qualify as independent contractors if they are “rendering services as part of an independent business.” This narrow test subjected myriad workers to coverage as employees, even if the employer exercised limited (or no) control over how they performed their jobs.
Recently, in SuperShuttle DFW, Inc., the Board reversed course and reinstated its pre-FedEx test. This test balances the following 10 factors to determine whether the “employer” exercised sufficient control over the workers’ employment.
- The extent of control which, by the agreement, the master may exercise over the details of the work.
- Whether or not the one employed is engaged in a distinct occupation or business.
- 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.
- The skill required in the particular occupation.
- Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
- The length of time for which the person is employed.
- The method of payment, whether by the time or by the job.
- Whether or not the work is part of the regular business of the employer.
- Whether or not the parties believe they are creating the relation of master and servant.
- Whether the principal is or is not in business.
In balancing these factors, the Board concluded that the airport shuttle franchisees were not employees, but instead independent contractors. The Board relied heavily on the facts that the drivers leased or owned their work vans, that they were paid by the customer per fare (as opposed to by the hour or day), and that they maintained nearly unfettered control over their daily work schedules and working conditions. Thus, the franchisee-drivers had significant entrepreneurial opportunity for economic gain (or loss).
This decision is significant, in that it restores some common sense middle ground to the issue of who counts as an employee under the National Labor Relations Act. It bears watching if other agencies (such as the Department of Labor’s Wage and Hour Division) continue this trend.
This is an excellent decision by the Board and clarifies in simple language the requirements that can create an independent contractor. As usual, a word of caution! A written agreement, alone, is not sufficient to determine the status. The business and independent contractor must interact following the guidelines noted above. Do not stray. If you are not sure have your counsel or an experienced consultant assist you.