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April 20, 2021

PRO Act Gains Key Allies in the Senate

Some promo pros think the bill, if enacted, could hurt the industry, particularly independent contractors and companies that rely on them.

By  Christopher Ruvo

The controversial PRO Act, which has leaders in the promotional products industry concerned, has gained two important supporters in the U.S. Senate.

Senator Joe Manchin of West Virginia and Senator Angus King of Maine have declared their support for the proposed federal legislation, which aims to strengthen unions and encourage more people to participate in them. Both senators said they would co-sponsor the bill, formally known as the Protecting the Right to Organize Act.

Labor Law under magnifying glass

Senate Majority Leader Chuck Schumer has said he would bring the bill to the floor once it gains 50 co-sponsors. As of this writing, the bill has 47 co-sponsors, all Democrats but for King and Vermont Senator Bernie Sanders – both liberal independents that caucus with Democrats. The three Democrat senators who had not yet co-sponsored the bill are Mark Kelly and Kyrsten Sinema of Arizona and Mark Warner of Virginia.

“I look forward to working with my colleagues, on both sides of the aisle, to move this bill through a legislative process,” Manchin said.

Republican support for the bill is unlikely – and that could ultimately prevent it from becoming law. The reason is that 60 votes would be needed to end a filibuster that Republicans could use to prevent a vote on the bill.

The PRO Act passed the House of Representatives with only five Republicans voting in favor of it. Political analysts say it’s basically a given that the act will not secure the 10 Republican votes required to end a likely filibuster.

Still, Democrats could try to get around the filibuster by using their majority (Senate is split 50-50, with Vice President Kamala Harris being the tie-breaking vote) to legally remove it as an option, but for that they would need the support of Manchin, who has said he would not under any circumstances vote to remove the filibuster.

Democrats could also potentially try to pass the PRO Act as part of President Joe Biden’s proposed $2.3 trillion infrastructure investment proposal by using a process called budget reconciliation – a mechanism that allows for the sidestepping of the filibuster and for a piece of legislation to pass by a simple majority. However, there are strict rules on what kind of legislation can be passed through reconciliation and analysts so far have said that the PRO Act would be a longshot to qualify.

Even so, the act remains alive. That has some promo professionals worried. The PRO Act contains language that critics say would largely wipe out independent contractor status under most scenarios and compel companies across industries in the U.S. to reclassify contractors as employees.

Promo pros have spoken out, saying the act would drive up industry firms’ labor costs, possibly making companies less competitive. It could also compel companies to part ways with many of those currently classified as independent contractors, leading to a rash of hard-working promo professionals losing their livelihoods.

“This legislation would be a major blow to industry entrepreneurs,” Dawn Olds, senior vice president of operations for Sterling, IL-based Top 40 distributor HALO Branded Solutions (asi/356000), told ASI Media when the PRO Act passed the House.

Olds is also head of Promotional Products Association International’s (PPAI) Government Relations Advisory Council (GRAC), which opposes the PRO Act. “PPAI and GRAC are strongly urging all industry participants to make their voices heard in Congress,” Olds said.

The language in the PRO Act that has the industry concerned regards a so-called “ABC” test that states any  “individual performing any service shall be considered an employee 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.”

Nonetheless, PRO Act proponents say freelancers’ fears are misplaced. They assert the worry is based on confusion and fueled by anti-union entities that want to see the legislation defeated. Writing for pro-socialist publication Jacobin, labor lawyer Brandon Magner said the PRO Act would not kill freelancing or cause damage to freelancers.

“The ABC test, if passed as part of the PRO Act, would only affect the analysis of employee versus independent contractor status for the purposes of the National Labor Relations Board,” Magner wrote. “Put simply, the relevant question is whether certain workers possess rights under Section 7 of the [National Labor Relations Act], which guarantees employees (and employees only) the right to strike, collectively bargain, and engage in various other ‘concerted activities’ for ‘mutual aid or protection’…”

Magner continued: “What would the PRO Act not affect? Literally anything else. It would not change a worker’s employment status for the purposes of state laws, such as those involving minimum wage, overtime, unemployment compensation or various benefit schemes. Thus, a worker could feasibly be classified as an employee with unionization rights under the NLRA while still qualifying as an independent contractor under said state laws.”

PRO Act critics are skeptical that, in practice, such a narrow application of the independent contract definition would be maintained.

“Union proponents of the new bill, as well as politicians beholden to the powerful groups, insist that it’s only about expanding the people who can be in unions,” Erik Sherman, a freelance business, economics, finance and tech journalist, wrote for Forbes. “Not if you look at the evidence. The PRO Act is only a first step in a plan to expand the ABC test — which is a 1930s-era approach to identifying employees — to all areas of labor, employment and tax law.”

Sherman added: “The result would be to outlaw millions of independent contractors (probably about 10 million at current IRS estimates of actual ongoing business owners), presumably clearing out people who might compete with union members.”

If enacted, the PRO Act would give employees more power to participate in strikes, empower the National Labor Relations Board (NLRB) to bring penalties against companies and corporate directors who violate labor laws, and enable the NLRB to reinstate employees while their grievance against an employer is heard.

The bill would also, among other measures, weaken “right-to-work” laws. Under these laws, employees who work at unionized workplaces are banned from negotiating contracts that require employees who are not union members to contribute to the cost of union representation – something that, if reversed, could hit workers within the promo industry in the wallet. By way of further explanation, right-to-work laws prohibit agreements between employers and labor unions that govern the extent to which an established union can require employees’ membership, payment of union dues, or fees as a condition of employment, before or after hiring.

The U.S. Chamber of Commerce is vehemently opposed to the PRO Act. The Chamber has said that the bill would force employees to pay union dues regardless of whether they support a union, threaten private ballots in union elections, and strip workers of their independent contractor classification.