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News March 10, 2021

‘PRO Act’ Passes in the House

The bill poses a major threat to independent contractors and firms that rely on them in the promo industry, leaders say.

By  Christopher Ruvo

The House of Representatives has approved a bill that redefines what constitutes an independent contractor – a change that leaders in the promotional products market staunchly oppose as it’s likely to drive up labor costs and threaten the livelihoods of the industry’s many independent contractors.

On Tuesday, March 9, the House passed the Protecting the Right to Organize Act (PRO Act) in a 225 to 206 vote that fell largely along party lines. Only five Republicans voted for the bill, while just one Democrat opposed.

Before the bill can become law, the Senate must also pass it. It’s uncertain if that will happen. Republicans, who generally oppose the act, have enough seats in the Senate to stymie the act’s passage. President Joe Biden supports the legislation and, if it makes it through the Senate, would sign it into law.

The main thrust of the PRO Act is to strengthen unions and encourage more workers to organize. Still, it contains language related to independent contractors that has promo leaders deeply concerned.

Introduced in the House in early February, the PRO Act would largely wipe out independent contractor status under most scenarios and compel companies across industries in the United States to reclassify contractors as employees.

In particular, the legislation says that an “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.”

Some promo executives believe that would be disastrous for the industry, as it could exponentially drive up industry firms’ labor costs, making companies less competitive, and/or compel companies to part ways with many of those currently classified as independent contractors, leading to a rash of hard-working promo professionals being put out of work.

“Independent contractors play a critical role in the promotional products industry, with both distributor and supplier firms. This legislation would be a major blow to industry entrepreneurs,” said Dawn Olds, senior vice president of operations for Sterling, IL-based Top 40 distributor HALO Branded Solutions (asi/356000). 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.”

North Carolina Rep. Virginia Foxx, the GOP leader of the House Committee on Education and Labor, voiced a position held by many in promo and beyond who oppose the PRO Act. Arguing against the bill on the House floor, she said it would wipe out the freedoms of entrepreneurs and individual workers, saying it’s they in fact who’ve built America’s middle class, not unions. She particularly called attention to the plight of independent contractors, saying they’re using that flexible status to maintain a living during the COVID-affected economy.

“It is unconscionable that Democrats would consider a bill that would take millions from workers’ paychecks, cost employers an estimated $47 billion in new annual cost, infringe on workers’ First Amendment rights, and put small businesses at further risk of closing their doors,” Fox said in a call with opponents of the bill on Monday, USA Today reported.

Rep. Bobby Scott, a Democrat from Virginia who introduced the PRO Act in the House this year, has said the legislation is essential to address what he described as growing income inequality by protecting workers’ rights to join a union and negotiate for higher wages and better benefits.

The House version of the bill can be read in full here. If enacted, it 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 PRO Act would finally give workers the right to organize and form unions that they’re supposed to have had under law for years and years, but that employers have routinely stripped them of because employers have broken and bent labor law to such an extent that the current labor law is virtually meaningless,” Lane Windham, the associate director at the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University told USA TODAY.

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 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.

“A bill cannot be ‘pro-worker’ if it harms employees, threatens job creation and undermines our economic recovery,” said Suzanne Clark, president and CEO-elect of the U.S. Chamber of Commerce. “The PRO Act would threaten worker privacy, force employees to pay union dues or lose their jobs, and trample free speech rights. The Chamber will fight to ensure this wish list of union-sponsored priorities fails in the Senate and never becomes law.”