Employee or independent contractor? It’s a question few employers can afford to ignore when classifying workers — particularly as authorities have stepped up their scrutiny in recent years. In one recent case, Lancaster Symphony Orchestra v. National Labor Relations Board, the U.S. Court of Appeals for the District of Columbia considered whether a National Labor Relations Board (NLRB) determination that musicians were employees and not independent contractors should be upheld.

SWEET SOUNDS TURN SOUR

It all started when a union filed a petition for certification pursuant to the National Labor Relations Act (NLRA) seeking to represent the musicians of the Lancaster Symphony Orchestra of Lancaster, Pennsylvania. The orchestra fought the petition, arguing that its musicians were independent contractors and didn’t have the right to join a union. The Regional Director of the local NLRB office agreed with the orchestra.

However, upon appeal, the NLRB held that, because of the orchestra’s “control” over the musicians and their limited “entrepreneurial opportunity,” the musicians could qualify as employees. When the NLRB conducted an election, the union won. The orchestra petitioned for review to the appeals court. Meanwhile, the NLRB cross-applied for enforcement of its determination.

CONFLICTING VIEWS

When reviewing the NLRB’s determination, the court didn’t apply a de novo standard. (Applying such a standard entails considering a legal question for the first time, affording no deference to the lower court’s determination.) Instead, the court found that making a determination involved common law principles of agency, which don’t require administrative expertise necessitating the special credence usually given an agency’s judgment. So it applied a lesser standard whereby the NLRB’s determination would be upheld if “it can be said to have made a choice between two fairly conflicting views.”

The court considered the same factors of agency that the NLRB had set forth in Section 220(2) of the Restatement (Second) of Agency, including:

• The extent of control the employer had over the musicians’ work,
• Whether the musicians’ work was part of the employer’s regular business,
• Whether the musicians were paid by the job or the hour,
• Skills required to perform the job,
• The length of time musicians were employed,
• Whether the musicians and employer believed they were creating an employer-employee relationship, and
• Whether the musicians had a significant entrepreneurial opportunity for gain or loss.

The court found that several factors favored the musicians being employees. For example, the orchestra practically regulated all facets of the musicians’ performance and exercised ultimate authority over their work. (The orchestra argued that the musicians exercised control over their performances by practicing before rehearsals. Also, there was an orchestra committee and the principal musicians instructed other orchestra members.) The court further determined that the musicians’ work was part of the orchestra’s regular business and they were paid by the hour because they received additional compensation when rehearsals exceeded a certain amount of time.

As for the musicians’ opportunity for gain or loss, the court found that they didn’t have much. While they could decline performances and perform with other orchestras or have other jobs, the musicians couldn’t contract to fill multiple chairs or assign, sell or hire someone to fill their places. However, three other factors favored the musicians being independent contractors. Their work required a high degree of skill, their length of employment was short and they signed agreements stating they were independent contractors.

Because the factors could lead to a conclusion that the musicians were either employees or independent contractors, the court stated that “two fairly conflicting views” existed. Therefore, it deferred to the NLRB’s decision. The court noted that it wasn’t deciding how it would classify the musicians, only whether there were conflicting views for deferral.

EMPLOYEES OVER CONTRACTORS

Among other things, the outcome of this case is a sign of the times. When their status is challenged, workers increasingly are found to be employees rather than independent contractors. For employers, this means that workers are entitled to the protections of wage and hour and employment discrimination laws.