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Labor Board Expands Definition of Employee, Reversing Trump-Era Ruling

Labor regulators issued a ruling on Tuesday that makes it more likely for workers to be considered employees rather than contractors under federal law.

Overturning a ruling issued when the board was under Republican control, the decision effectively increases the number of workers — like drivers, construction workers or janitors — who have a federally protected right to unionize or take other collective action, such as protesting unsafe working conditions.

The ruling ensures that “workers who seek to organize or exercise their rights under the National Labor Relations Act are not improperly excluded from its protections,” said a statement by Lauren McFerran, the Democratic chairman of the labor board, which voted 3 to 1 along party lines to broaden the standard.

Determining whether a worker is an employee or a contractor has long depended on several variables, including the potential employer’s control over the work and provision of tools and equipment.

In 2019, when the board was controlled by appointees of President Donald J. Trump, it elevated one consideration — workers’ chances to make more money based on their business savvy, often described as “entrepreneurial opportunity” — above the others. It concluded that such opportunities should be a key tiebreaker when some factors pointed to contractor status and others indicated employment.

In its decision in 2019, the board said that a ruling during the Obama administration had improperly subordinated the question of moneymaking opportunities.

That 2019 ruling appeared to be a victory for gig companies like Uber and Lyft, whose supporters have argued that ride-share drivers should be considered contractors in part because of the opportunities they have for potential profit — say, by determining which neighborhoods to work in.

The latest decision returned the board to the standard laid out in the Obama era, explicitly rejecting the elevation of entrepreneurial opportunity above other factors.

The turnabout was criticized on Tuesday by businesses that rely heavily on contractors. In a statement, Evan Armstrong, chair of the Coalition for Workforce Innovation, which represents companies like Uber and Lyft as well as industry trade groups, said that the ruling “decreases clarity and threatens the flexible independent model that benefits workers, consumers, entrepreneurs, businesses and the overall economy.”

Some labor experts, however, say it is not clear that gig companies like Uber and Lyft, which set the prices that passengers pay, provide drivers with enough bona fide entrepreneurial opportunity to qualify them as contractors even under the old standard.

In his dissent, Marvin E. Kaplan, the board’s lone Republican member, made a version of this argument, concluding that the workers in the case before the board — wig, hair and makeup stylists who work with the Atlanta Opera — “have little opportunity for economic gain or, conversely, risk of loss.”

As a result, he agreed with the board’s majority that the stylists should be considered employees who have the right to unionize.

But Mr. Kaplan wrote that the lack of entrepreneurial opportunities meant that the stylists should have been considered employees even under the Trump-era standard, and that there was no need to alter it.

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