Preemption of State Labor Law in the PRO Act
The Protecting the Right to Organize (PRO) Act has reemerged. Passed by the House of Representatives in 2020 and again in March of this year, it faces a near-certain defeat in the Senate. However, President Biden’s newly-announced infrastructure proposal, the American Jobs Plan, has become another vehicle for extreme changes to US labor laws hidden behind the trillions of dollars in spending and tax increases. This proposal would overturn 70 years of labor law, three Supreme Court decisions, 27 states’ right-to-work laws, and nine state constitutions with a single mandate from Washington D.C.
Included in the 2021 rendition of the PRO Act is a stricter standard for classifying workers. Commonly dubbed the “ABC test,” this new standard would reclassify workers who do not meet all three factors—the ABCs—as employees under the National Labor Relations Act (NLRA). These factors are in stark contrast to the principles put forth in the ALEC Uniform Worker Classification Act, which simplifies both the criteria used to define independent contractors and the criteria used to differentiate independent contractors from employees. While the ALEC model policy better allows workers and business owners to choose the working relationship they both want, the ABC test would reclassify millions of contractors to employees, taking away the flexibility and autonomy they currently enjoy.
Putting individual worker choice aside, the inclusion of the ABC test in the PRO Act is still surprising, given the positive data that continues to emerge on the success of independent contractors in the 21st century economy. Over 79% of independent contractors across America indicate that they prefer their “alternative employment arrangement.” Sixty percent of Americans who have transitioned to independent contractor roles report higher incomes. Full-time independent workers contributed more than $1.28 trillion to the American economy in 2018. Ninety-one percent of independent contractors expect the best days are ahead for independent work. With such stats, it should be no surprise that more workers continue to be attracted to independent contractor work and the gig economy.
For those curious about how the ABC test standard would affect the workforce, they need look no further than California. Made effective January 1, 2020, California’s Assembly Bill 5 (AB5) set the ABC test as the Golden State’s new worker classification standard, impacting the over two million Californians working as independent contractors and the businesses and customers relying on these workers.
Vox Media gained instant attention for its response to the law: it announced it was cancelling its contracts with over 200 California-based freelance writers to avoid crossing reclassification thresholds. Other businesses found themselves facing labor cost increases of up to 30% due to the reclassification of their subcontractors as employees. For small business owners like Brian Butler and Lilly Walters, the increase made their business models unprofitable. Brian and his wife have had to close shop. Lilly has lost over 50% of her work and can no longer hire the subcontractors.
Large companies and corporations were also included in AB5’s reclassification blitz; gig economy darlings Uber, Lyft, Instacart, and DoorDash were told their drivers would be considered employees under California law. Claiming the reclassification would render their business models untenable, the companies supported the campaign to include a proposition on California’s 2020 ballot to create an exemption from AB5, while still providing minimum earnings and healthcare subsidies to workers. Less than a year after AB5’s effective date, California’s Proposition 22 passed with over 58% of the vote and created an exemption for app-based transportation and delivery drivers. There have been over 100 exempted professions from the overly broad ABC language, none of which are included in the PRO Act language.
As stated above, the ABC test that would reclassify millions of workers is just one inclusion in the PRO Act. Other sections of the bill would expand unionization processes and union power by allowing workers to be fired for not joining or paying a union and by allowing secondary boycotts of companies not involved in union negotiations. The bill would also require employers to give out employees’ personal information (including home addresses and cell phone numbers) to unions. AFL-CIO president Richard Trumka acknowledged in a Congressional hearing in 2020 that this section would allow union representatives to follow workers to the “grocery store” and into their “homes.”
With so many Americans still working from home and millions utilizing the gig economy at higher rates than ever, worker choice and flexibility are becoming increasingly important and desirable. Policies like the ABC test and mandatory union dues for nonunion members—which can both be found in the PRO Act and the American Jobs Plan—restrict choice and flexibility and insert the government as the decision-maker. Californians already sent a speedy and clear message that restricting worker options is not needed or wanted. The rest of America should take note.