The drum beat against the use of independent contractors continues. Yesterday, the National Labor Relations Board reinstated the Obama-era FedEx standard for employee classification. It is a long-expected ruling which impacts the independent contractor test for many employers.
WHAT HAPPENED? The decision, brought by independent-contracted hairstylists and make-up artists for the Atlanta Opera who wanted to form a union, brings back the NLRB’s longstanding commitment to common law principles of the independent contractor test. in 2019, the Board ruled that entrepreneurial opportunity for gain or loss should be the “animating principle” of the independent-contractor test (the SuperShuttle test). Now, the NLRB has minimized the impact of entrepreneurial opportunity going forward. In this case, the Board found the group seeking to unionize were actually employees and could organize.
WHY SHOULD I CARE? Good question! People forget that the classification of independent contractor is an exception to the presumption that workers are employees–and entitled to any and all protections and rights under the law. This case is a good reminder that misclassifying employees as independent contractors to avoid various obligations (union organizing here) does not work. Many states have even more stringent tests than the federal tests under the NLRB and the IRS (cue the Blue states), with lots of penalties, back pay and interest at stake.
WHAT SHOULD I DO? If you are using independent contractors on a regular basis in your workforce, it is likely they are misclassified. We hear all the time that the arrangement is mutual, the person wanted the IC status. But you cannot negotiate away the law and consent is not a defense. Misclassification is an expensive mistake to make and you may not even know you are in violation. We have a fixed fee Classification Audit to help you avoid liability when outsourcing services. We make it easy to spot compliance issues before the DOL or your state agency does.
QUESTIONS? We can help.