The Common-Law Agency Test and the Ten Factors: How the NLRB Distinguishes an Employee from an Independent Contractor

The National Labor Relations Act extends the right to unionize, bargain collectively, and strike exclusively to "employees." If a worker is legally classified as an independent contractor, the entire statutory framework of federal labor protection simply does not apply to them. This binary classification is the binding constraint of American labor law. A worker either possesses the full suite of federal organizing rights, or they possess none at all.

To determine who falls on which side of this boundary, the National Labor Relations Board (NLRB) does not rely on a single statutory definition. Instead, it applies the common-law agency test, a multi-factor balancing framework derived from the Restatement (Second) of Agency. The test requires adjudicators to weigh ten distinct factors to assess the economic and operational reality of the relationship between the worker and the hiring entity.[3][7]

The necessity of this test stems from the 1947 Taft-Hartley Act, which explicitly excluded independent contractors from the NLRA's protections. In the 1968 landmark case NLRB v. United Insurance Co. of America, the Supreme Court mandated that the Board apply general agency principles to resolve these disputes. "There is no shorthand formula or magic phrase that can be applied to find the answer," the Court wrote, establishing that "all of the incidents of the relationship must be assessed and weighed with no one factor being decisive."[2]

The first and historically most prominent factor is the extent of control the employer exercises over the details of the work. If a company dictates not just the final product but the exact methods, hours, and procedures used to achieve it, the worker looks more like an employee. The second and third factors examine the nature of the occupation: whether the worker is engaged in a distinct business of their own, and whether the work is typically performed under direct supervision or by a specialist operating autonomously.[3]

The fourth factor assesses the level of skill required for the occupation, with highly specialized skills often pointing toward independent contractor status. The fifth evaluates who supplies the instrumentalities, tools, and place of work. A worker who brings their own heavy machinery to a site operates differently from one who logs into a company-provided terminal at a corporate desk. The sixth factor considers the length of time the person is employed; indefinite, continuous relationships suggest employment, while finite, project-based engagements suggest independent contracting.[3]

The final four factors address the structural integration of the worker. The seventh looks at the method of payment—whether by the hour or by the job. The eighth asks whether the work is part of the regular business of the employer; a law firm hiring a plumber to fix a leak is hiring a contractor, but a plumbing company hiring a plumber is likely hiring an employee. The ninth examines the parties' intent and whether they believe they are creating a master-servant relationship. The tenth simply asks whether the principal is actually in business.[3]

Because the Supreme Court prohibited treating any single factor as decisive, the test is inherently subjective, leading to pendulum swings in how the NLRB applies it. In June 2023, the Board issued its decision in The Atlanta Opera, Inc., fundamentally recalibrating the framework. The 3-1 decision overturned the 2019 SuperShuttle standard, which had elevated "entrepreneurial opportunity" to an animating principle that guided the evaluation of all other factors.[1][4][5]

Under the SuperShuttle framework, if a worker had theoretical opportunities for profit or loss, that potential heavily tilted the scale toward independent contractor status, even if the hiring entity maintained significant control. The Atlanta Opera majority rejected this hierarchy. The Board ruled that entrepreneurial opportunity "is not an animating principle of the common-law test," but rather just one aspect of the overall analysis, specifically tied to whether the worker is rendering services as part of an independent business.[1][5]

The Atlanta Opera decision also established that the Board must evaluate actual, not merely theoretical, entrepreneurial opportunity. If a company's contract permits a worker to hire subcontractors or work for competitors, but the economic realities of the job make doing so practically impossible, the NLRB will no longer weigh those theoretical freedoms heavily in the company's favor. The focus shifted strictly to the constraints actually imposed on the worker.[1][6]

This recalibration carries massive structural implications for industries reliant on non-traditional labor models. Ride-share platforms, logistics networks, and franchise operations structure their unit economics around the assumption that their workforce consists of independent contractors. Reclassifying these workers as employees would force companies to recognize organizing efforts, negotiate collective bargaining agreements, and assume liability for unfair labor practices under Section 8 of the NLRA.[7]

Management-side legal counsel immediately noted the restrictive nature of the new standard. Law firms advising employers warned that the Atlanta Opera framework makes it substantially more difficult to classify workers as independent contractors. By stripping entrepreneurial opportunity of its overarching weight and returning to a strict, flat reading of the ten common-law factors, the NLRB effectively lowered the barrier for workers seeking to unionize.[4][5]

Conversely, labor advocates view the return to the traditional ten-factor test as a necessary correction to prevent misclassification. They argue that companies frequently use the label of "independent contractor" to strip workers of statutory protections while still exercising granular control over their daily tasks through algorithmic management and strict operational guidelines.[6][7]

The durability of the Atlanta Opera standard remains tied to the political composition of the NLRB, whose members are appointed by the President. Because the ten-factor test is a balancing act rather than a rigid formula, future Boards retain the authority to shift the weight back toward entrepreneurial opportunity without having to rewrite the underlying common-law factors. Until Congress amends Section 2(3) of the NLRA to provide a bright-line statutory definition, the boundary between employee and contractor will continue to be litigated factor by factor.[7]