Freelancers are freaking out about the PRO Act. Here is why they should - and shouldn't - be worried.
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- The PRO Act, which passed in the House, includes a metric for reclassifying workers that freelancers object to.
- Many independent contractors don't object to the right to collective bargaining, but worry the bill could set a dangerous precedent.
- Lawmakers must strip the "ABC test" from the bill.
- Larry Buhl is a multimedia journalist, author, and podcast host.
- This is an opinion column. The thoughts expressed are those of the author.
- See more stories on Insider's business page.
Back in 2019, I predicted that California Assembly Bill 5 (AB5), which upset the independent contractor world by reclassifying freelancers in hundreds of occupations as employees unless they could prove they're not, would be seen by other lawmakers as a road map, rather than a cautionary tale. And here we are: a new bill working its way through Congress, the Protecting the Right to Organize Act of 2021 - or PRO Act - should give independent contractors across the country reason to worry, though not necessarily because of the intent of the legislation.
The ABC test
What made AB5 so problematic was its reliance on the ABC employment test to classify workers. ABC says a freelancer should be an employee, unless:
"A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
B) The worker performs work that is outside the usual course of the hiring entity's business; and
C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed."
The worker must meet all three. Part B is where many independent contractors went through the buzzsaw: If you're in the same business as a client, you must be an employee, and, presumably the company would hire you, even if you've only been putting in a few hours a week for them. Yet, instead, most employers are just not working with California freelancers anymore.
ABC is also the basis for reclassification in the PRO Act, which passed the House of Representatives earlier this month with bipartisan support. However, there's one big difference: While AB5 reclassified employment status for workers in California, the PRO Act reclassifies freelancers nationally, but only for the purpose of collective bargaining rights. That's all - or so it states. Supporters say it "levels the playing field" for unions, to give more people the right to vote in union elections.
I spoke with Professor Michael LeRoy, an expert in labor law and labor relations at the University of Illinois Urbana-Champaign, to find out whether freelancers should worry about the PRO Act. He said there's been some hyperbole and misunderstanding about it.
"Does [the PRO Act] force you to be in a union? No. If 10 million [freelancers] are classified as employees, a certain amount will want to form one or join one, but they could also vote no," he told me.
I'd be okay with more people being able to collectively bargain if they want. Freelancers I spoke with aren't apoplectic about theoretical pressure to join a union, either. What does concern us greatly is the ABC test being used to reclassify independent contractors for any reason. Almost everyone I spoke with feared the ABC test would be misapplied by companies who read the reclassification part of the law, but miss the part about unions. Freelancers also worry that the ABC test will set a precedent for future legislation. It already has: Several states used AB5 as a model when proposing new "gig worker protection laws."
Unintended consequences
Fred Topel, a Los Angeles-based entertainment journalist and co-leader of California Freelance Writers United (CAFWU), implored national lawmakers to not use the ABC test. "If you take out the ABC test, I think a majority of [CAFWU] members would support it. We've seen no evidence that AB5 worked as lawmakers intended, but plenty of evidence of unintended negative consequences from the ABC test," he said.
Robert Sette, a freelance translator in Denver, predicted that any big change to labor laws using the ABC test would make hiring companies think twice about using independent contractors. "Many won't see [the PRO Act] as only for labor organizing. They'll see this as a risk management issue. To avoid possibly running afoul of the law, they'll cut loose freelancers."
That did happen in California. The Facebook group Freelancers Against AB5 has been compiling personal stories of independent contractors in California who lost work and income directly as a result of that law, well before the COVID-19 crisis. Based on dozens of "no Californians need apply" notices citing AB5 as the reason, it appears that many companies were so bewildered by the law and scared of fines for possibly violating it, they simply gave up on California independent contractors.
The road to career hell was paved with good intentions
After AB5 passed, I joined CAFWU and other advocates in California to petition state representatives to amend the law. We succeeded in getting exemptions for some professions.
Through the process, we learned that most lawmakers had no clue about the scope of the independent contractor world, and assumed most people deriving an income were either employers, employees, or exploited would-be employees. The bill's biggest proponents said, in so many words: Don't worry if you lose work because all your clients will hire you full time, with benefits! We explained that's not how it works, emphasizing that most independent contractors are thriving professionals.
I recognize that some independent contractors do want full-time work, and that many other workers are truly misclassified and exploited. There should be protections from misclassification, except - there already are laws covering that. Any worker can sue for misclassification right now - albeit with difficulty.
We don't need new laws that help some, but also legislate hundreds of thousands of successful careers out of existence. LeRoy agreed the ABC test is a blunt tool that "oversimplifies" the labor force and would need "significant refinements" and exemptions if kept in place. A potential solution could be a multi-factor balancing framework to determine who's an employee, one like the IRS uses.
In order to prevent the ABC test from wreaking havoc on more independent contractors' lives, constituents must start conversations with their representatives, starting with the Senate subcommittee members that will be discussing it. They could point to surveys showing that 30% of the US workforce is either self-employed or hired by the self-employed and estimates that freelance income is nearly 5% of GDP.
Stripping the ABC test from the PRO Act could prevent lawmakers from proposing more damaging bills, like the one written last year by Democratic Senators Patty Murray of Washington and Sherrod Brown of Ohio. Their bill gives some benefits to temp and gig workers, but, like AB5, it uses the ABC test to sweep all professions into its net.
This shouldn't be a partisan issue, but sadly it is. Many Republicans insist any labor protections will hurt business and therefore can never be considered. Based on comments from AB5's proponents, many Democrats assume what's good for unions surely benefits everyone. Labor classifications must be more nuanced than that because today's labor market is complicated.
Pro-labor lawmakers need to understand that freelancers are not necessarily suffering gig workers, or getting by until they land a "real job." They should either toughen enforcement of existing laws or make sure new laws explicitly help workers who need protections, but not hinder independent contractors' ability to earn a living. Labor law shouldn't be a zero sum game.
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