Will the PRO Act Hurt Freelancers?

Will the PRO Act Hurt Freelancers?

Labor lawyer Brandon Magner discusses what the PRO Act’s ABC test means for freelancers.

The following conversation is excerpted from the latest episode of Belabored. Co-host Sarah Jaffe is joined by labor lawyer Brandon Magner to discuss what the PRO Act’s ABC test means for freelancers. 

Sarah Jaffe: Can you explain the ABC test included in the PRO Act?

Brandon Magner: The ABC test is a test for determining who is an employee and who is an independent contractor under whichever law it’s written into. It’s as simple as it sounds; there are three prongs, A, B, and C. You have to satisfy all of them to still count as an independent contractor. That switches the usual presumption from being a jump ball between whether you’re an independent contractor and employee; under the ABC test, it’s presumed that you’re an employee, and you have to satisfy the three prongs in order to be an independent contractor.

The A prong is that you have to be free from the company’s control. The B prong says you have to be doing work that isn’t central to the company’s business. And the C prong says you’re an independent business in that industry.

Jaffe: For somebody like me, who is an independent journalist, often it’s the B prong that is problem, right? As freelance writers, we are doing something that is very central to the company’s business most of the time. How would this categorization be used under the PRO Act?

Magner: So the PRO Act—the Protecting the Right to Organize Act, which just passed the House—only amends the National Labor Relations Act (NLRA) and its own amendments. It’s purely within the code of labor law. It doesn’t change, per se, who is an employee or independent contractor, but it creates a test that would instruct the National Labor Relations Board (NLRB) on what analysis they’re supposed to use to determine who is and who isn’t an employee or an independent contractor.

This is important because Section 7 of the NLRA is what affords workers the rights to engage in concerted activities for mutual aid or protection: things like strikes, collective bargaining, or something as simple as talking about pay with your coworkers even when your employer doesn’t want you to. And the NLRA only applies to employees. So it is important to determine who gets those rights under Section 7.

The current test that the board uses is what we would call a common-law test: something that’s derived from (generally) hundreds of years of passed-down employment standards, coalesced into a multi-factor test that courts use. This is different than the prongs of the ABC test that we were talking about earlier, because the ABC test says you have to satisfy all of those prongs, while the common-law test basically gives courts free range to weigh the factors in whichever way they believe. It can be pretty inconsistent. And unfortunately, these tests have grown larger and harder to pinpoint over the years.

The IRS test, which I’ve seen some people trying to advocate for, has over twenty factors that they can weigh. [Tests like that] give certain Republican appointees a lot more freedom to basically do whatever they want with the law. Peter Robb, the former general counsel of the NLRB under Trump, used it to say that Uber drivers are not employees, which goes against what many activists and many scholars believe is correct under employment classification.

Jaffe: Right. The fear among freelance writers on this issue comes from California’s AB 5, which was targeting companies like Uber. But it also had specific provisions and limits for freelance writers built into it that I think are getting confused with the ABC test. Can you explain a little bit about what AB 5 said?

Magner: Sure. I think it’s important to remember that the California issue didn’t start with AB 5; it started with a California Supreme Court case called Dynamex, in which the justices determined the employment standard under employment law now known as the ABC test. Under Dynamex, there were no exemptions. That was just the law and anybody who tried to test that in court would have probably been ruled an employee. AB 5 was the vehicle to try to create these exemptions; whether that succeeded or failed, and certain exemptions for certain industries, is different than what the default would have been under the law, which was just that you would have been an employee.

The exemption that the California legislature created for the journalism industry was that you could write up to thirty-five articles for any one client and still be able to be classified as a contractor. If you wrote any more over that limit, you would be determined to be an employee. But under the Dynamex case, without any intervention from AB 5, it would have been zero articles. So I see a lot of sort of frustration and even malice thrown towards AB 5 and the politicians leading that charge, but the issue was pushed and emerged from judicial decisions. It wasn’t really the legislature that was just creating it out of thin cloth.

Jaffe: So what’s the difference between the ABC test as applied to unionization rights, basically, and collective action under the PRO Act? As opposed to the broader question under Dynamex? And under AB 5?

Magner: The ABC test in California was dealing with wage and hour laws, so it had nothing to do with unionization per se; rather, it had to do with whether people qualified for certain benefits. This was what the independent contractors who see a lot of issues with the law are really worried about, because that determines things like tax status and tax filing.

The ABC test under the PRO Act is completely, solely, only focused on the NLRA, and who gets those Section 7 rights I spoke about earlier to engage in collective bargaining, to be able to file unfair labor practice charges to the NLRB.

This is important because under antitrust law, there’s a labor exemption for those who count as employees for collective bargaining purposes; otherwise, antitrust law can be read pretty broadly to count what a lot of unions engage in and negotiate with employers as price fixing. But that labor exemption is written into the law to try and balance that and allow unions free range to negotiate for their members.

But the act is very clear that it’s only for the purpose of collective bargaining rights. There’s not some spillover effect into other laws; I’ve seen a lot of confusion on this. Just because the NLRB hands down a decision saying, for instance, that some truck drivers, construction workers, journalists, or anybody else are now employees for Section 7 purposes, that does not mean the IRS or any other federal agency plucks that ruling from the NLRB and automatically applies for their own purposes. Unless they have also an ABC test, or something else, directing them to do so under their own legislation.

The PRO Act will be confined to its own purposes. I want to stress that the ABC test really comports with the NLRA and its statutory mission. In its very first section, the NLRA says that it is the official economic policy of the United States government to encourage collective bargaining. And if collective bargaining can only be afforded to employees under the law, then there should be this presumption that the NLRA covers as many people as possible. So, honestly, the law should be tipped in favor of presuming that you’re an employee, for collective bargaining purposes. It should be presumed that you have the right to band together with your coworkers and be able to negotiate rates of pay, hours, benefits, or whatever, above whatever your employer wants to unilaterally give you.

Jaffe: In California, in fact, because this is where Hollywood is, there are lots of organizations that involve people who are freelancers who still have collective bargaining rights. That hasn’t changed their freedom under the law.

Magner: Right. There are a lot of examples in industries where employees don’t all work under one same roof. They may create some employment mechanisms that allow them to maintain their collective bargaining rights while still being very portable between their clients or employers. I think the most obvious example is the hiring halls in the construction or longshore industry, where you’re not working for one employer; you might have ten, twenty, thirty over a given year, and each one of those will count as your employer. What’s important is that you’re keeping your benefits and your collective bargaining rights.

Jaffe: That’s something I’ve written about as a potential model for journalism going forward. But, anyway, why do you think this is the issue that people are whipping up fear around right now?

Magner: I think the California example is fresh in people’s minds, and it’s not just individual workers who are concerned about this. There’s a multi-hundred-million dollar industry being created right now by Uber and Lyft and other gig economy employers who are trying to whip up a frenzy about this law, because they view it as existential to their business model of, let’s be honest, basically avoiding labor laws to run as small a labor cost as possible.

I don’t even like the word misclassification, because it almost sounds like it’s an accident. You know, “Oh, I misclassified you, I apologize.” Really, it’s basically synonymous with union avoidance. For employers like FedEx, that’s their entire business model. It’s why all those drivers you see in FedEx trucks are considered business owners or independent contractors: because FedEx wanted to avoid the mass unionization that United Parcel Service has. They’ve litigated that issue for decades. Under the old common-law standards, they were able, very successfully, to escape employee status for their drivers.

People have said, the ABC test doesn’t have enough nuance, it’s very rigid. It’s very strict. But the problem is the common-law test isn’t read as nuanced by Republican appointees to the NLRB—it’s sort of a get out of jail free card for any employment relationship that could lead to unionization rights. We need to have something solidly in place that says, “Look, you’re presumed to be an employee for the purposes of collective bargaining, for the purposes of Section 7 rights.” The NLRA is meant to be read very broadly, it’s meant to cover as many workers as possible under its statutory mission.

I just saw that there was a small amendment passed with the PRO Act by Representative McBath, that says the ABC test within the PRO Act is meant to only apply to the NLRA. There’s no risk of ambiguity with other agencies immediately reading this into their laws and guidelines; it’s going to be confined to the NLRA.

I think the PRO Act is being read as a scapegoat for frustrations with how the California situation played out. But I think it’s also worth mentioning at the ABC test is in many other states; it’s in Massachusetts, for example, for the purposes of their wage and hour laws. It’s in dozens of states for the purposes of their unemployment compensation laws. That’s a similar situation: We want as many people as possible to be able to get unemployment benefits as soon as possible when they are laid off. And so they created an ABC test to apply as broadly as possible to capture as many people as possible.

Another important thing to point out is that you can only avail yourself of these rights under the NLRA if you or a coworker go to the NLRB and file an Unfair Labor Practice charge or petition for an election. The NLRB doesn’t just come to your workplace overnight, after the ABC test is installed, and say “You are now an employee, goodbye to your business model.” The NLRB does not have the ability to go out and seek its own charges that it thinks may violate labor law. It can only process the charges that are brought to it. If over half of the people in your bargaining unit or your proposed bargaining unit want to form a union, then they will do so. But until that point, there is no risk that the distinction will be relevant for your business model if you’re an independent contractor.

Sarah Jaffe is the co-host of Dissent’s Belabored podcast and the author of Work Won’t Love You Back: How Devotion to Our Jobs Keeps Us Exploited, Exhausted, and Alone.

Brandon Magner is a labor lawyer. He writes about unions and the law at his Substack, Labor Law Lite.