SHRM Urges NLRB to Preserve Current Independent-Contractor Standard

Allen Smith, J.D. By Allen Smith, J.D. February 22, 2022

​The Society for Human Resource Management (SHRM) asked the National Labor Relations Board (NLRB) in a Feb. 10 brief to preserve a standard that supports the independent work models needed in today's workplace.

The board is considering replacing the standard created by the 2019 SuperShuttle decision and has invited briefs on whether it should do so. In SuperShuttle, the board overturned a 2014 NLRB decision that made classification as an independent contractor harder to achieve.

The overturned decision didn't rely solely on common-law factors, but instead focused on economic realities, such as whether a worker is economically dependent on a company, in determining whether someone is an independent contractor. Under the 2014 test, if the worker was economically dependent, that worker likely would have been found to be an employee rather than an independent contractor, said David Pryzbylski, an attorney with Barnes & Thornburg in Indianapolis.

In SuperShuttle, the board returned to the common-law test it used for years before the 2014 decision. This test takes into account a variety of common-law factors, including the relationship the company and individual think they are creating and how much control the company has over the person's work.

Entrepreneurial Opportunity

In SuperShuttle, the board evaluated the common-law factors through the prism of entrepreneurial opportunity, SHRM wrote in its brief.

"The circuit courts have long recognized that the common-law factors must be analyzed through the lens of entrepreneurial opportunity owned by the worker, which 'better captures the distinction between an employee and an independent contractor,' " the brief stated, quoting the U.S. Court of Appeals for the District of Columbia Circuit.

The test derived from the SuperShuttle decision makes sense and follows the natural understanding of what it means to be an independent contractor, the brief added.

" 'The full-time cook and the executive are employees and the lawn-care provider is an independent contractor not because of the degree of supervision under which each labors but because of the degree to which each functions as an entrepreneur—that is, takes economic risk and has the corresponding opportunity to profit from working smarter, not just harder,' " SHRM stated, quoting the D.C. Circuit again.

No Carte Blanche for Rejecting Employee Status

SuperShuttle's standard is not a carte blanche basis for rejecting employee status, the brief added. "Rather, it presents a balanced approach that properly honors the common-law factors without an overemphasis on a particular one."

The NLRB has issued four decisions, including SuperShuttle, on how the board evaluates the common-law factors through the prism of entrepreneurial opportunity, the brief noted. The board found in every case after SuperShuttle that the workers at issue were employees under the National Labor Relations Act (NLRA).

Benefits of Independent Work for Workers

Workers who engage in independent work have a variety of reasons for doing so and reap different benefits from such work.

"Workers prefer flexibility because it allows them to choose for whom they provide services and opportunities to pursue multiple passions simultaneously," the brief said.

Independent work also affords workers a greater ability to care for members of their family. In addition, when a worker can choose how, when and where to work, the individual is able to set their own priorities, the brief noted.

HR Wants the Independent-Contractor Classification Clarified

The main concern about independent contractors voiced by HR professionals in a 2019 SHRM and SAP SuccessFactors survey was the desire for clarity and specificity around independent-contractor classification, the brief said. The research surveyed 940 independent contractors, 350 employees, 424 managers who work with external workers and 1,175 HR professionals across the U.S.

"Nearly three-quarters of human resource professionals reported that they are somewhat concerned, concerned or very concerned about the legal landscape of external work, with 11 percent reporting that they are very concerned," the brief noted.

HR professionals need to keep in mind that there are other tests for independent-contractor status under other laws, including state law, that may produce different results than under the independent-contractor standard from the NLRA, noted Michael Lotito, an attorney with Littler in San Francisco.

The SHRM brief stated that "the current legal climate regarding independent work is exceedingly unclear and, at times, contradictory."

This ambiguity has caused organizations to not train external workers due to uncertainty in the interpretation of the Internal Revenue Service guidelines stating that periodic or ongoing training about procedures and methods is strong evidence that a worker is an employee.

"Yet, the Occupational Safety and Health Administration's (OSHA's) rules make staffing agencies and host employers jointly responsible for maintaining a safe work environment for temporary workers—including ensuring that OSHA's training requirements are fulfilled," the brief noted.

Businesses' External-Workforce Needs

SHRM's research found that businesses want flexibility when they engage with independent contractors, the brief stated.

"Though it is often speculated that organizations turn to external workers to save money, less than 20 percent of human resources professionals indicated that their organization used external workers to save money," the brief said.

Instead, some of the most cited reasons for using external workers were access to specialized talent with specific skills or expertise (48 percent of survey respondents) and staffing specific projects and initiatives (also 48 percent).

"Independent work is a growing and essential part of the economy that is here to stay," the brief said. "Businesses and workers require clarity and consistency regarding the legal status of their relationship."

SHRM added, "Agency rulings that embrace these modern work relationships reflect today's workplace and the economic opportunities available to workers who prefer the flexibility and freedom of providing work as nonemployees to multiple businesses. Developing and communicating to businesses and workers rules that promote a positive business environment encourages innovation and allows workers to be provided certain information, guidance and resources by businesses."



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