The Protecting the Right to Organize Act of 2021 (PRO Act) passed the House of Representatives Tuesday night by a vote of 225-206, with mostly Democratic support. It heads over to the Senate now, where it is not expected to move as quickly. The PRO Act amends the National Labor Relations Act (NLRA) by providing stronger collective bargaining rights and expanding the group of workers who qualify for collective bargaining. If enacted, it would create major changes to U.S. labor law.Many of you have written to us asking about how the PRO Act will affect you as a freelance journalist or author and expressing concern about its consequences for freelance and independent contract work. There is a good deal of incorrect or misleading information about this legislation online fueled by a misunderstanding of the provisions of the PRO Act, as well as the anti-union and Uber/Lyft lobbies. The Authors Guild has been closely following the PRO Act with interest for two reasons:
- We have been advocating for collective bargaining rights for freelance writers and other creators for several years, and the PRO Act allows some freelancers to collectively bargain.
- The PRO Act contains an “ABC” test to determine what independent contractors (1099 workers) are eligible to collectively bargain. The Authors Guild does not agree that it is the right test to determine whether creative freelancers have the right to collectively bargain, and there is some concern that the same standard will be adopted to determine whether an individual is an independent contractor or employee for other purposes.
WHAT THE PRO ACT DOES NOT DOThere has been a good deal of online hype that the PRO Act uses the ABC test to create a national worker classification law. To be clear, it does not. It amends the federal labor law that provides collective bargaining rights and governs the National Labor Relations Board, and nothing else. Coverage under the NLRA does not directly affect employment status for any other law. It is not unreasonable, however, to fear that federal agencies and states might look to the PRO Act language as a model and adopt the ABC test as well, although it should be noted that the Department of Labor updated its rules for determining whether an individual is an employee or independent contractor as recently as January 6, 2021 (prior to the Biden Administration), and continues to use the more complex common law multi-factor balancing framework, as does the IRS. We are nevertheless sympathetic to concerns that the ABC test—which is a less nuanced, bright-line test compared to the traditional common law balancing tests that allow for consideration of a broader set of factors—could be adopted more widely, and potentially create limitations for freelance writers. To prepare for this, we have drafted amendments for alternative language for the PRO Act that we will work to have adopted in the Senate version of the bill.
A LITTLE BACKGROUND ON THE ABC TEST AND THE PROBLEMS IT CAN CAUSE WHEN USED BROADLY TO CLASSIFY WORKERSThe ABC test gained notoriety last year when California incorporated it into a worker misclassification law referred to as “AB5” to distinguish between employees and true independent contractors. California, like many other states, previously used a common law balancing test to determine a worker’s status, and like most balancing tests, it contained a gray area that gave employers some wiggle room. Gig employers in some fields have abused the lack of bright-line clarity and refused to treat workers as employees where they clearly should be. As a result, they have been able to hire workers for less than minimum wage, without benefits, and without paying unemployment or other employee taxes. While the impetus for the California law was a good one—to prevent gig workers from being mistreated through misclassification and denying them corporate benefits or legal protections like minimum wage, unemployment compensation, or workers compensation—the problem is that, by itself, the ABC test is too broad and sweeps in too many independent workers. Here is what the three-part ABC test says: An individual performing any service shall be considered an employee and not an independent contractor, unless—
- 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;
- the service is performed outside the usual course of the business of the employer; and
- 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.
WHAT IS THE PROBLEM WITH WRITERS BEING TREATED AS EMPLOYEES UNDER A STATE WORKER CLASSIFICATION LAW? ISN’T IT A GOOD THING?There are a number of reasons that freelance writers and other creative freelancers might not want to be treated as employees under state law:
- Employees do not get to keep their copyrights (unless a contract provides otherwise) and are not even considered the “author” of the work under the Copyright Act. This means that they do not retain any rights in their work (whereas a freelance journalist working as an independent contractor can get publishing rights back after an initial exclusivity period and retain other rights, such as audio, video, and book rights), nor do they have the right under section 203 of the Copyright Act to recapture their rights after 35–40 years. An employee can always try to negotiate the ability to obtain ownership of their copyrights, but good luck with that—especially with no collective bargaining!
- Employees cannot deduct business expenses under the current tax code (on the other hand, they do not have to pay self-employment taxes).
- Many companies do not give employees flexibility of working hours and workplace, although that is due to company policy, and there is nothing legally preventing companies from letting employees like writers (who generally can write anywhere) work on flexible schedules and telecommute.
WHAT DOES THE PRO ACT DO AND WHY DOES IT USE THE ABC TEST?The PRO Act amends the NLRA by providing stronger collective bargaining rights and expanding the group of workers who qualify for collective bargaining. The Authors Guild has long been lobbying for collective bargaining for freelance writers and creators and supports the aspects of the PRO Act that expand collective bargaining—but with some changes, as described below. The principal operative provision of the NLRA for employees is Section 7, which guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right “to refrain from any or all such activities.” Section 8(a)(1) bolsters that right by making it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the Act. “Employees” is a defined term in the NLRA, and sections 7 and 8 only apply to individuals that fall within that definition of “employee,” which is: “any employee… unless this subchapter explicitly states otherwise.” Independent contractors, as defined in the NLRA, are one of the categories carved out and excluded from the definition of employee. The definitions section clearly states that the definitions are for purposes of the NLRA—not for any other purpose. The PRO Act expands the pool of individuals covered by that provision by adding to the definition of “employees” those individuals who provide services (including erstwhile independent contractors) and do not meet the three requirements of the ABC test. What this means is that, if the PRO Act is enacted, independent contractors will be given rights and protected under the NLRA as if they were employees—i.e., the rights to form and join unions and collectively bargain, unless:
- they are free from control and direction in the performance of their service;
- their service is performed outside the usual course of the business of the employer; and
- they are customarily engaged in that type of service as an established trade, occupation, profession, or business.