NLRB IC Change

The National Labor Relations Board (NLRB) recently issued a ruling that modifies the test for determining when a worker is properly classified as an independent contractor or employee. The NLRB rejected the prior standard developed during the Trump administration. Under that standard, the worker’s entrepreneurial opportunity for gain or loss was considered to be the primary principle of the independent contractor test. Instead, the NLRB has now stated that the old standard will apply, so that the worker’s entrepreneurial opportunity should be taken into account and weighed alongside the list of traditional common-law factors.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the recent NLRB change to the independent contractor status test.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Bloink

Byrnes

Their Reasons:

Bloink: The Trump-era standard that gave primary weight to two factors when determining independent contractor status made it much too easy to classify workers improperly as independent contractors. Only focusing on a worker’s personal opportunity for profit and loss alone often results in situations where workers are misclassified. Employers should be paying attention to the big picture when it comes to classifying their employees and the old common law test requires courts and employers to evaluate all of the facts when making these important determinations.

Byrnes: When it comes to determining worker classification status, we should have a clearer test than the old 20-factor standard courts have struggled with for decades. The Trump-era rule gave employers clear guidance on how to classify workers and we should be focused on simplifying the law to the extent possible so that taxpayers know what to expect.

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Bloink: In the particular case that the NLRB was considering, the workers in question really had no opportunity to use their skills for any employer other than the one they were currently performing work for. Such a situation makes it extremely clear that the focus only on entrepreneurship simply does not work in all situations—and that a more comprehensive analysis is necessary.

Byrnes: The old common law standard requires courts to weigh 20 factors in determining proper classification--which of course leads to a messy situation where employers are never really certain whether they have gotten it right. The focus should be heavily geared toward whether the worker truly is independent and has an opportunity to profit on their own, aside from the business contracting for the work.

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Bloink: Absent clear guidance from the DOL to the contrary, we should be clear that employers are required to evaluate all of the facts when determining worker classification. The DOL has yet to issue a final rule on the matter—meaning that it makes complete sense that board members, judges and employers should evaluate the totality of the circumstances in the meantime.

Byrnes: We’ve been kicking this worker classification standard back and forth for years at this point. This current NLRB decision is likely to have very little impact—aside from confusing employers and workers even further. The analysis simply shows that different NLRB members, like different judges, have different views when evaluating a worker’s proper classification.