While the recent national focus has been on legislation about Covid relief, the Protecting the Right to Organize Act (a.k.a., PRO Act) has flown under the radar. If you are an independent contractor or freelancer, or hire them for your company, it’s time to look at the screen and see the green blinking blip that’s headed right at your business.
When the PRO Act was introduced in May 2019, it was intended to protect workers’ rights to unionize. A few months later, legislators added the ABC Test, which uses an outdated labor standard from the 1930s to distinguish employees from independent contractors rather than the more modern IRS Test.
Does that acronym sound familiar? That’s because the ABC Test is the same tool used by California in last year’s AB5 law, which misclassified countless thousands of Californians as employees rather than independent contractors. Lost work was inflicted on a wide range of professions, from journalists and event planners to truckers; even employers outside the state were reluctant to hire freelancers that lived there. After the fact, the legislature carved out more than 100 exemptions to the appallingly flawed law.
As potential national policy, the ABC Test earns a solid F: restricting or even eliminating many types of self-employment across the country, just as we’re recovering from Covid.
Proponents sell the PRO Act under the guise of protecting workers, but that’s only part of the story. For unions, it’s about increasing dues and lobbying clout; for governments, forcing individuals into W-2 employment offers steadier tax flow. While proponents claim that the ABC Test is only applicable to labor law, they don’t tell you that this is only step one of three. The Biden administration plans to make ABC the federal standard for employment and tax laws, too.
The vast majority of self-employed individuals have chosen that path rather than corporate employment. We pay income taxes, plus self-employment tax for Social Security and Medicare. We do not need to be protected from our clients. Moreover, the harm to independent contractors extends to groups who require or desire flexibility in their work. The ABC Test would have an outsized effect on women, older workers, people with disabilities, and people of color. Both the Hispanic Chamber of Commerce and NAACP fought against AB5 in California.
If you own a business, you know that independent contractors provide access to skilled talent and more flexibility than hiring W-2 employees. As California companies learned, being forced instead to hire W-2 employees increases expenses and complexity.
There is a simple fix for the PRO Act: Dump the ABC Test and replace it with the IRS standard. Governments seeking to prosecute law-evading companies already have the tool. Under commonsense IRS rules, companies and self-employed contractors could continue doing business as we have for decades.
Indicating what’s at stake, unions and well-funded groups such as the Democratic Socialists of America (DSA) are bombarding U.S. Senate offices with hundreds of thousands of phone calls in favor of the PRO Act. On social media, the DSA is bragging about having filled Senators’ voicemail boxes so that no one else’s voices can be heard.
Meanwhile, opposition to the act is coming from self-employed people whose very businesses are at stake—and we represent about 35% of the workforce. The most visible entity, Fight For Freelancers USA, is composed of nearly 2,000 volunteers across the country. The list of organizations against the ABC Test is growing by the day: the U.S. Chamber of Commerce, American Society of Journalists and Authors, and Owner-Operator Independent Drivers Association, among many others.
Proponents of the PRO Act are fond of handwaving away our concerns. “Fine, just don’t join a union,” they say. But that’s not reality. Even if we voted against a union or chose not to join, we would still be impacted by the wages, fees, and working conditions that they negotiated.
To borrow the aphorism of ancient Greek statesman Pericles: Just because you do not take an interest in unions doesn’t mean unions won’t take an interest in you.
The current situation is dicey; if the Democrats overturn the filibuster, all bets are off. If the filibuster stands, the PRO Act has a tougher climb to 60 votes. In recent weeks, Rep. Elise Stefanik, R-New York, and Sen. Tim Scott, R-South Carolina have been cheered by people across the political spectrum—even those who generally support unions—for arguing in favor of independent contractors’ rights. Arizona’s Sens. Kyrsten Sinema and Sen. Mark Kelly will be lauded as heroes if they can persuade their colleagues to change the ABC Test to the IRS Test. Failing that, voting no would be the only way to prevent potential disaster for independent contractors in Arizona and across the country.
Freelance writer and editor Jake Poinier (Twitter: @DrFreelance, email: [email protected]) is the owner of Phoenix-based Boomvang Creative Group and the author of four books on the business of freelancing.