New Bill Threatens Independent Contractor Status Nationwide

Newly proposed legislation in the U.S. House of Representatives would effectively ban independent contractor classifications under federal labor law. H.R. 2474, the Protecting the Right to Organize (PRO) Act, amends the National Labor Relations Act to establish a new definition of employees that expressly eliminates independent contractors in the U.S. The new legislation makes a broad presumption that all workers in the U.S. are employees unless each requirement of a newly established "ABC" test can be met.

The legislation also sets new criteria for determining occupational status as an independent contractor rather than as an employee.  The ABC test outlined in H.R. 2474 is reportedly vague, and the proposed legislation does not provide a specific method to meet the requirements implemented by the test. If signed into law, the PRO Act would significantly change how thousands of promotional products companies operate and do business with each other.

Like other industries, promotional products companies rely on the services provided by independent contractors. This popular business model is mutually beneficial for host companies and contractors in circumstances where traditional employment relationships are not pragmatic for either party. Promotional consultants in the U.S. are mostly small-business owners—they set their own hours and schedules, set their own rates, select their clients and market under their own brands.

Promotional consultants remain independent because they can run a business as their own, decide their own career path, and be involved in their family and community, among other incentives. These contractors are self-employed even though they may sell on behalf of a single company. Without the support of a distributor firm essentially acting as a lender to the consultant, the promotional consultants would either have to require payment from end buyers in advance or have to finance the orders themselves. Many independent contractors in the promotional products industry run very small businesses, are often sole proprietors and are unable to self-fund these transactions.

This proposed federal legislation comes on the heels of California’s Assembly Bill 5 which addresses employee classification and became law on January 1. Under that law, workers are considered employees unless they can meet all three conditions that would classify them as independent contractors. The federal bill is very similar to California’s law, so much so that the language is nearly identical in some places.

PPAI’s sources indicate the PRO Act will be scheduled for a full vote on the House floor very soon. The Association urges industry practitioners to reach out to their House representative to educate them about why independent contractors in the promotional products industry do not want to be forced to reclassify as employees. Click here to take action.

 

filed under January 2020
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Comments (12)
Stacey Carey
February 8, 2020
I have read the Bill passed in CA. From my understanding, we (as promotional product distributors) still would not fall under "employee" status; regardless of whether or not you are a partner of a larger company, like Geiger, iPromoteU, Halo, or some other. The terms contained within the Sales Partner contract do not meet the requirements contained under the Bill's criteria. Distributors not affiliated with a 3rd party corporation would not be affected either. You are a business owner, with a Tax ID, collect, pay, and report Sales Taxes, the same as any business large or small. Your "employment status" would remain the same. Should this Bill pass, the larger concern for small business owners will pertain to how you stucture services agreements with and when hiring part-time staff, temps, or other independent contractors who provide services for you and/or your business. To avoid having Employee Taxes or other Employee fees levied, it is important to know what to include and/or not include within the language of the contractual agreement set forth between you and any service provider you may work with on a routine and contractual basis (i.e Virtual Assistant, Marketing Consultant, IT, etc). I recommend reading the Bill before getting to upset. I do not agree with the Bill, however I do not believe it will affect us to the extent you may initially think. I have not read the new Bill, and I am speaking based on my knowledge of this change made in CA... Have a great weekend, TGIF!
Lisa Chalker
February 1, 2020
This is a disgrace and an attack on small business which is the driving force in this nation.
Stuart C Young
January 31, 2020
They have already do somthing simular in California. Most small businesses rely on relationships with independent contractors who enjoy the freedom and flexibilty to compete with the big boys. These kind of policies are an attack on freedom of choice and place an place a hand full of large conglomerates and unions in charge of controling the workforce.
Pam Palmieri
January 31, 2020
The messaging from PPAI is misleading ... I am not an independent contractor to suppliers??? I run my own business with its own tax id. I think they are talking about distributors who work under one of the companies such as Kaiser Blair. How about a link to the bill so we can read the actual language?
Gary
January 30, 2020
If you're an independent contractor then I don't have to tell you the insanity of this rule. You would destroy the entrepreneurial Spirit of America.businesses that form out of their garage and go out and do services for others regardless of what business they are are the heart and soul of this country.
Lisa Hutchins
January 29, 2020
I urge everyone to read the entire bill. Beyond defining independent contractor status, the bill would allow collective bargaining agreements to REQUIRE ALL "employees" in a unit to contribute fees to a labor organization as condition of employment. Once you become classified as an "employee", can forced union representation be far behind? The bill would also preempt state laws. Many states have Right To Work laws which do not require the payment of union dues as a condition of employment. Even small distributorships would be affected by this bill. In the past, some states have required family caregivers to join unions and pay dues. All distributors, both large and small, should contact their Democrat Representatives and Senators, and voice their displeasure with this bill. H.R. 2474 has 215 Democrat & 3 Republican co-sponsors. This bill is basically a way to circumvent the courts and states which recently have curtailed the dues-collecting ability of the labor unions. The Democrats receive many millions of dollars in campaign contributions from the unions, and this bill is a form of repayment. The text of the entire bill, along with the sponsors, and the CBO analysis, is available online at congress.gov H.R. 2474 . If our Representatives will not support us as small business persons, then we have to make sure that in November of this year, we will no longer support them.
Remy Fenster
January 28, 2020
You might want to make the "Click Here to Take Action" section a bit bigger or more noticeable..
Traci Lowery
January 28, 2020
RE: CA ABC test: AB5 sets a new “ABC Test” for determining a worker’s independent contractor status, which is intended to be easier and more predictable for employers and workers. Under the new law, a worker is considered an “employee” unless they meet all three conditions to be classified as an independent contractor. The three conditions are: 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 The worker performs work that is outside the usual course of the hiring entity’s business; and The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed. More information on the ABC and Borello tests, exemptions and requirements under AB5 is available at https://www.dir.ca.gov/dlse/FAQ_IndependentContractor.htm.
Dan McAnally
January 28, 2020
(A) the worker is free from control and direction of the hirer in connection with performing the work, both under contract and in fact, (B) the worker performs work outside the usual course of the hiring entity’s business, and (C) the worker customarily engages in an independently established trade, occupation, or business of the same nature as the work performed for the hirer.
Al MUllin
January 28, 2020
Please leave the independent contractor status as it currently is, I work for a small business who relies on these professional to provide a service for us. We can not afford employees in all of the areas these people are able to provide their services.
Liz Lindsay
January 28, 2020
What are the ABC test requirements or criteria one needs to meet?
Brad Otto
January 28, 2020
This is very concerning for us as a family of self-employed/ Independent Contractors. I will dive into this deeper and most assuredly be contacting the Representative of our area. The country was founded by a small business person(s) or vendors. Cutting their nitch into the community bringing resources and tools to the market. It would be a sad day to take that INDEPENDENCE from the American Market place and putting the burden on "Larger Companies" to absorb the Self Employed.
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