From JDSupra, Steven Bernstein and Todd Lyon discuss the key aspects of the Protecting the Right to Organize Act of 2021 (the “PRO Act”) including parts that will make it more difficult for employers who want to engage with independent contractors. Steven and Todd write:
As we recently forecasted, the House of Representatives has reintroduced a bill designed to radically transform the labor relations landscape, substantially tilting the playing field towards organized labor. The “Protecting the Right to Organize Act of 2021,” or PRO Act, was introduced on February 4 after an earlier version of the same legislation failed to clear the Senate last year. However, now that both houses of Congress and the White House are controlled by the Democratic party, this proposal stands closer than ever to becoming law. What do employers – both unionized and non-unionized – need to know about this startling prospect, and what can you do to help prevent it from becoming reality?
The PRO Act: A Primer
If you think you’ve heard about this proposal before, you’re not experiencing déjà vu. The same bill was passed by the House a year ago this month. But at that time, it faced a hostile Senate controlled by the G.O.P. – which kept the proposal from reaching the floor for an up-or-down vote – and a president that would have vetoed the measure in the unlikely event it reached his desk. The winds of change have shifted, however, and we now have a Senate controlled by the Democrats by the slimmest of margins and an unabashedly pro-union president who campaigned on promises to deliver for organized labor.
So what could you be in store for if this law passes? Whether you currently operate in a unionized environment or have yet to encounter a labor union, be prepared to rethink just about everything you know about the regulatory framework governing your labor relations functions. The PRO Act would make it far easier for unions to organize your workforce, grant far more power to workers protesting working conditions, and shackle unionized businesses like never before, while undermining other longstanding employment models embedded with workplaces across the country.
Shattering Commonplace Workplace Standards For All Employers
But the PRO Act wouldn’t just impact unionized workplaces. It would completely transform workplace law for unionized and non-union businesses alike by invalidating arrangements that have become commonplace over the last several decades.
- Broadening Misclassification Law: The PRO Act would significantly expand the definition of “employee” to capture workers who are currently independent contractors, making it difficult for businesses to properly classify workers as such. In bringing California’s ABC test to the national stage, the bill would require businesses to prove (a) the individual is free from the employer’s control, (b) the service they perform is outside the usual course of the employer’s business, and (c) the individual is engaged in the same trade or business as called upon to perform. This would deny many individuals their choice and ability to work independently, threatening the expanding gig economy, and eliminating business flexibility to flex their size due to growth. The bill would also make it an independent violation to misclassify workers as independent contractors.
- Expanding Joint Employment: The PRO Act would also codify the extremely broad joint employer standard previously established by the Obama NLRB by virtue of its decision in Browning Ferris Industries (“BFI”), exposing employers to liability for workplaces they don’t control and workers they don’t employ. Under this standard, courts and government agencies would be free to consider the exercise of control over employment terms that is either direct or indirect, and actual or potential, leading to a potential joint employer finding merely by establishing that a business has “reserved” such authority.
- Prohibiting Arbitration Agreements: The PRO Act would ban pre-dispute arbitration agreements in all workplace settings, effectively overturning the Supreme Court’s landmark decision in Epic Systems upholding use of class waivers. Eliminating the ability of employers and employees to resolve disputes through arbitration would potentially overwhelm the court system by increasing needless and expensive lawsuits, including class action ligation.
- Mandatory Posting Requirement: The bill reinstates prior proposed regulations compelling employers to post notices educating employees on their rights under the NLRA, and to notify all new hires of the information on that notice with penalties of $500 for every incident of technical non-compliance.
- Expanding Legal Exposure: Finally, the bill would adopt never-before-seen penalties that would liquidate (double) the amount of damages (up to $100,000) for violations, in addition to providing for backpay, front pay and consequential damages. It would also create a new private right of legal action against employers directly in federal court, providing for recovery of back pay (without any reduction for interim earnings), front pay, consequential, liquidated, and punitive damages, and attorneys’ fees. Punishment at such levels could have a severe chilling effect on employers seeking to assert their free speech and other statutory rights when it comes to day-to-day workplace activities.
It’s worth noting that although it enjoys the support of the new administration, the bill faces a number of hurdles before it becomes law – chief of which is a filibuster that threatens to block any further progress on this legislation to the extent it remains in place through the current session of Congress. Even within the Democratic side of the aisle, the bill could generate opposition from some of its own moderate members. That being said, one of the chief impediments to its passage has already been removed, and the bill could receive a friendlier reception under the current political climate.
Even if the bill ultimately stalls over the coming months, its progress bears watching, as agencies such as the NLRB and the Department of Labor (DOL) could attempt to implement some of its components through exercise of their rulemaking or decision-making authority. For example, once it returns to Democratic control later this year as expected, the NLRB could choose to revisit business-friendly joint employer and independent contractor standards established under the Trump administration. Similarly, the DOL could choose to resurrect a persuader rule that was enjoined in the late stages of the Obama administration.
Regardless of whether the bill becomes law in the short term, employers are encouraged to consult with their legal counsel to devise proactive labor relations strategies tailored to the unique aspects of their workplace cultures given this rapidly shifting regulatory environment. Look for additional resources from Fisher Phillips designed to arm employers with the tools they need to weather the labor relations storm going forward. In the meantime, you may want to express any practical concerns directly to your elected representative, before this legislation threatens to undermine the interests of businesses large and small.