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What Does the PRO Act Really Mean for Freelancers?

April 22, 2021 by Kate Michael
What Does the PRO Act Really Mean for Freelancers?
(Photo courtesy microbizmag.co.uk via WIkimedia Commons)

WASHINGTON — The Protecting the Right to Organize Act is a landmark labor rights bill that could transform the way the United States classifies workers. The PRO Act is intended to modernize the National Labor Relations Act but is controversial, especially in the freelance community, for its attempt to codify what classifies workers as employees versus independent contractors. 

“You’re not going to find a labor attorney in town that doesn’t want the Act passed,” said Diana Bardes, partner at Mooney Green Saindon Murphy & Welch, speaking to an online gathering convened by Freelance DC, which advocates on behalf of independent contractors working in the Washington, DC area. “This Act is aimed at addressing a laundry list of issues in NLRA, which hasn’t been amended since 1947,” said Bardes. (In point of fact, the NLRA was amended in 1974 with specific healthcare amendments to extend coverage and protection to employees of non-profit hospitals.)

“There’s a lot going on in this Act, and I have lots of opinions on these varying aspects,” said Bardes, though, in general terms, the PRO Act focuses dually on the classification of employees and the ability of workers to organize unions, strike, and receive benefits. 

Bardes summarized that the PRO Act would prohibit ‘capture audience’ meetings, impose penalties for employer violations of labor law, prevent employers from stalling the bargaining process to avoid reaching an agreement with workers, protect employees’ right to strike, allow underrepresented employees to engage in collective actions or class action lawsuits, end ‘right to work’ laws, and use the ABC Test to determine whether independent contractors should be considered employees for the purpose of collective action bargaining rights.

Freelancers appear to be less concerned over the unionization aspects of the PRO Act, and more worried that the Act could affect employment and contract relationships, either forcing conversion of freelancers to W2 employees or making it harder for some freelancers to find work in their industries. 

“If passed as currently written, the PRO Act would codify the ABC test under labor law across the country, upending the gig economy as we know it,” shared Jordan Teicher, director of content for Contently, a content marketing company, in an e-mail newsletter to the company’s user base on March 10, 2021.

The ABC test is one of three laws — including the Common Law test and the IRS test — applied to employment and contract relationships which provides legal guidelines for how businesses determine if a worker is a traditional employee or an independent contractor. 

According to the bill, a person must satisfy all of the following criteria to qualify as an independent contractor: A. The individual is free from control and direction in connection with the performance of the service, both under the contract for the performance of service and in fact. B. The service is performed outside the usual course of the business of the employer. And C. The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.

“The key problem comes down to part “B” of the ABC test,” said Teicher. “The language suggests the freelancer should somehow not perform work central to the employer. However, many freelancers get work precisely because they help companies with their core business needs. 

“Write a freelance blog post for a media company? You fail the test. Design an infographic for a creative brand? Same thing. The narrow constraints only seem to allow someone like a freelance accountant or plumber to sell their services.”

Recently, California put the ABC test under the spotlight as part of its AB5 law. AB5 was designed to provide more rights and protections to drivers for rideshare companies like Uber and Lyft, but that led to a lot of collateral damage for other types of freelancers. 

“We just saw this play out in California. Even before AB5 became law on Jan. 1, 2020, companies… laid off freelance workers to get ahead of the new policy,” Teicher said.

But Bardes said freelancers may be misinterpreting the intention of the Act and its “narrow application.” 

“The PRO Act doesn’t affect state classification of employees… [and it] doesn’t stop freelancers from continuing to do freelance work,” she said. Twenty-eight states already use some form of the ABC test for determining independent contractors, and the PRO Act “doesn’t create the same far-reaching effects of AB5” because it doesn’t redefine the term ‘employee’ for any purpose other than for situations under NLRA review. 

Even if this is true, freelancers fear that if the Senate passes the PRO Act, it could prove more difficult for independent contractors to secure work regardless of where they live — or that the language may be lifted from the bill and used for future labor legislation codifying the definition of employment. 

“In law school, they teach you to be skeptical of slippery slope arguments,” said Bardes. “Applying [the ABC test] to the IRS would be a really big deal. The outcry coming from all sources would be even greater than we’re hearing here on this narrow issue… I just don’t think those scenarios are as likely to come up as this scenario is.”

Instead, she said the consequences for freelancers could be labor relations privileges. 

“If you don’t pass the ABC test, there’s no effect. Or, if you do, and you don’t want to unionize, but your co-contractors do, you can pay a lesser fee than union dues — an ‘agency fee’ — and the union still has to represent you,” Bardes explained. “Or, you could be a 1099 employee for the purposes of the IRS and still be in a union.”

The PRO Act passed the House in March 2021 and it currently sits in the Senate Health, Education, Labor, and Pensions committee. Leadership has signaled that it will get a floor vote if 50 senators sign on as co-sponsors; it currently has 44. Alternatively, some have suggested tacking it onto the larger Infrastructure Bill.

Bardes admits that passage is doubtful. “I’m not particularly optimistic, but I am hopeful,” she said, stressing the importance of bill provisions that make it harder for employers to avoid unionization efforts on the basis of eligibility and harder for employers to stand in the way of unionization movements while also determining whether a group of workers is protected by NLRA in efforts to unionize.

“I’d rather err on the side of providing labor protections to those that need it,” she said.

Teicher agrees that lawmakers appear to have good intentions about helping workers and trying to increase wages, “but the bill is patched together in a way that could make the cure worse than the disease. It seems misguided to group so many different occupations under the same plan. Bloggers and copywriters are like apples and oranges. But putting writers and Uber drivers together is like comparing apples and frying pans.”

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