Labor Board’s Worker Status Ruling Faces Hurdle at DC Circuit

The National Labor Relations Board must overcome adverse precedent to win federal court enforcement of its decision bringing back an Obama-era test for determining whether a worker is an employee or an independent contractor.

A chief obstacle for the NLRB’s June 13 revival of the employment status standard from its 2014 ruling in FedEx Home Delivery is the US Court of Appeals for the District of Columbia’s 2017 rejection of that decision. That marked the second time the DC Circuit disagreed with the board and found FedEx drivers to be independent contractors.

Those DC Circuit rulings are particularly problematic because an employer unhappy with an NLRB decision can always appeal it to that court, regardless of where the company is headquartered or where the dispute took place.

The NLRB brought back its FedEx standard in a decision finding that makeup artists and hairstylists at the Atlanta Opera are employees with rights under the National Labor Relations Act, rather than independent contractors who don’t enjoy the protections of that law. The Democratic-majority NLRB scrapped the test from the 2019 ruling in SuperShuttle DFW, Inc., which was handed down by a board controlled by Trump-appointed Republicans.

The board’s Atlanta Opera ruling makes it easier for workers to prove they’re employees, laying the groundwork for union campaigns at Uber Technologies Inc., Lyft Inc., and other gig economy companies that rely on non-employee labor.

But federal courts must endorse NLRB decisions on employment status for those decisions to have real impact. The board lacks the independent authority to enforce its own rulings, so it must go to court if an employer ignores its orders.

A Known Hurdle

The US Chamber of Commerce, National Retail Federation, Marketplace Industry Association, and other business groups responded to the NLRB’s 2021 invitation for comments on Atlanta Opera by arguing that reviving the FedEx standard would create major problems on judicial review.

The DC Circuit’s views on employment classification under federal labor law played a prominent role in the Atlanta Opera majority opinion from the board’s three Democrats, as well as the dissenting opinion from its sole GOP member.

“The dueling opinions between majority and dissent are little more than polemic exercises in anticipation of what is likely to come: a circuit court denial of enforcement,” said Richard Reibstein, co-head of Locke Lord LLP’s independent contractor compliance and misclassification practice.

But other NLRB watchers said the DC Circuit’s earlier rulings don’t mean it’s bound to reject the Atlanta Opera ruling.

“This is a different case with different facts,” said Julie Gutman Dickinson, a union-side attorney with Bush Gottlieb ALC and a former NLRB lawyer. “It is clear that the board’s view is more in line with Supreme Court precedent than the DC Circuit or SuperShuttle.”

‘The Poster Child’

Labor law employment classification—whether under SuperShuttle or the FedEx test revived in Atlanta Opera—primarily turns on the same non-exhaustive list of 10 common-law factors. Those cover issues like the amount of control a company has over the work, the skill required for the job, and how the worker is paid.

The major point of departure between the two legal frameworks is the treatment of entrepreneurial opportunity. SuperShuttle elevated that opportunity as the “prism” through which to view the other factors, while FedEx merely considers it when assessing whether a worker was engaged in independent business.

The NLRB and the DC Circuit’s division on determining employment status opened in 2009, when the court reversed the board and ruled FedEx delivery drivers were independent contractors. The court said the board had shifted its emphasis over the years from employer control to entrepreneurial opportunity.

Five years later, the NLRB ruled that a different group of FedEx drivers were employees. The board rejected the DC Circuit’s view that entrepreneurial opportunity is the “animating principle” of the employment classification inquiry.

But the DC Circuit overturned that decision in 2017, pointing to its prior FedEx ruling.

“This case is the poster child for our law-of-the-circuit doctrine, which ensures stability, consistency, and evenhandedness in circuit law,” the court said. “Having chosen not to seek Supreme Court review in FedEx I, the Board cannot effectively nullify this court’s decision in FedEx I by asking a second panel of this court to apply the same law to the same material facts but give a different answer.”

Not ‘Insurmountable’

The DC Circuit’s pair of FedEx rulings is “obviously an obstacle, but by no means an insurmountable obstacle,” said William Gould, a former Democratic NLRB chair who teaches labor law at Stanford University.

The NLRB’s Atlanta Opera decision is “sound and solid” and properly categorized the board’s 1998 decision in Roadway Package System as the seminal case for employment status, Gould said.

In Roadway, the NLRB endorsed the use of the common-law factors from a 1958 treatise on business relationships, as well as the consideration of factors not specifically named there.

The DC Circuit’s view that entrepreneurial opportunity must play a pivotal role in employment classification isn’t as absolute or coherent as the court’s two FedEx decisions might make it look, said Michael Duff, a labor law professor at St. Louis University and a former NLRB attorney.

The court in 2016 enforced the NLRB’s conclusion that orchestra musicians were employees, in a case more similar to Atlanta Opera than either FedEx disputes, Duff said. That ruling in Lancaster Symphony Orchestra v. NLRB emphasized entrepreneurial opportunity doesn’t deserve a lot of weight in the employee-contractor analysis if the opportunity isn’t significant, he said.

“If I had to bet, I’d say the DC Circuit would likely uphold Atlanta Opera,” Duff said.