Clearing Up Confusions About the PRO Act


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Two articles were published earlier this week about the Protecting the Right to Organize Act (PRO Act) that contained confusing and misleading analysis about a specific provision in the bill (E. Tammy Kim at New York Times, Erik Sherman at Forbes). In both, the confusion surrounds the bill’s inclusion of the “ABC Test” for determining who is considered an “employee” for the purposes of the National Labor Relations Act (NLRA). I set the record straight below.

General Conceptual Framework

In the US, there are a lot of statutes governing labor arrangements. There is the Fair Labor Standards Act (FLSA), which provides minimum wage and overtime rights. There is the Civil Rights Act (CRA), which provides anti-discrimination rights. There is the Employee Retirement Income Security Act (ERISA), which governs employer benefit programs. There is the Internal Revenue Code (IRC), which creates various obligations related to withholding and reporting taxes. And on and on it goes.

One of the initially confusing things about this regime is that each statute uses the word “employee” at some point to indicate who is covered by the statute’s rules, but they don’t all use the word the same way. This rattles the brain a bit because, when it comes to language, we mostly like the words to mean the same thing across uses. And so, in this context, one might throw their hands up and say this labor regulation regime is an impossible mess because someone can be an “employee” under one statute while being an “independent contractor” under another.

But when you look again, you realize that these inconsistent word uses don’t actually create any significant problems. The word “employee” does not have any specific cosmic meaning that we are trying to tease out. It’s just a placeholder for “the kind of people we want this statute to apply to.” And it’s of course perfectly plausible and coherent to say that there are some jobs you want the FLSA to apply to that you don’t also want ERISA to apply to and some jobs that you want the CRA to apply to but that you don’t want certain parts of the IRC to apply to.

It’s unfortunate that this gets expressed as “this person is an employee under one statute but an independent contractor under another statute” but the underlying idea of “this person has bargaining rights but not overtime rights” is not especially hard to wrap your head around.

PRO Act Only Amends the NLRA

Under the PRO Act, the NLRA’s definition of the word “employee” is changed to the following:

An individual performing any service shall be considered an employee (except as provided in the previous sentence) and not an independent contractor, unless—

(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.

This is called the ABC Test because the statutory drafting of it always manages to get the three prongs written as lettered subsections (I suppose if they were numbered subsections, it would be the 123 Test).

The key to the ABC test is prong B. This prong essentially asks a judge to determine what kind of business an employer is engaged in and then to see whether the worker in question is providing labor that is in the usual course of that business. So, for instance, if a plumbing company hires a plumber and then sends them out on jobs, that plumber could not be an independent contractor because selling plumbing services for money is what the plumbing company does. On the other hand, if an accounting firm hires a plumber to fix their office’s burst pipes, that plumber could be an independent contractor since the accounting firm is not in the plumbing business.

Under this definition of “employee,” many people who are currently regarded as “independent contractors” under the NLRA would instead be regarded as “employees.” But remember from above, all this language really means is that many people who are not currently covered by the NLRA will now be covered by it. This change is not a cosmic declaration of what is an employee and what is an independent contractor. It is a declaration of who has NLRA rights and who does not.

The NLRA rights in this scenario would primarily be the rights to engage in protected concerted activity, meaning the right to organize and speak out in various ways without facing retaliation. It would also include the right to be included into union bargaining units.

Even though these changes are being implemented by changing the definition of the word “employee” in the NLRA, it must be emphasized that this does not therefore change that definition in any other statute. It’s a little bit confusing but not that confusing!

So when E. Tammy Kim spends the latter half of her piece talking about California’s AB5, which changed who was covered by the state’s wage and hour laws and unemployment insurance laws, she is just completely off base. All of that is completely irrelevant. The PRO Act does not change who is covered by the FLSA or various tax rules or any statute other than the NLRA. Those statutes have their own coverage universes. The stories and concerns Kim shares about AB5 are simply off topic. The same is true of most of what Erik Sherman writes about in his piece.

This Change Is Very Weak

The funny thing about this current crop of articles is that, when I first read the PRO Act, and saw this provision, I had the opposite reaction. It reads like someone wants to give a little bit of chum to people clamoring for the ABC Test without actually implementing it in any of the statutes where it would have a real impact, most obviously the FLSA.

As mentioned above, California’s efforts to implement the ABC Test went straight for wage and hour laws, which would require immediate changes from companies like Uber and DoorDash. This one does not do anything more than say certain people currently classified as independent contractors now have the right to be included in union drives and to engage in protected concerted activity. It’s a whole lot of nothing!

In the status quo, unions can already bargain over questions related to independent contractors. Many of them bargain for clauses that prevent subcontracting, for example. So it’s not even that this new rule sweeps independent contractors into a collective arrangement that they are currently insulated from. They can already have their jobs eliminated or converted into non-contracting positions through the NLRA’s collective bargaining processes. It’s just that right now they have no say in that process because they are not covered by the NLRA. Under the PRO Act, they would.