On February 4, 2021, House and Senate Democrats introduced the “Protecting the Right to Organize” or “PRO Act.” If passed, this Act represents the most significant labor law reform in over 70 years.
The PRO Act enacts sweeping changes to the National Labor Relations Act (“NLRA”), including dramatically expanding pro-employee and union protections, restricting the rights of unionized businesses, and substantially enhancing damages imposed for unfair labor practices. The Act will transform labor relations for union and non-union employers and will dismantle certain long-standing employment arrangements, such as below.
Ending state “right to work” laws
Twenty-seven states, including Arizona, have right to work laws, permitted by the NLRA. Under these laws, employees cannot be required to join or pay union dues as a condition of employment. The PRO Act effectively overturns these laws by allowing contract provisions requiring employees to pay union dues as a condition of their employment notwithstanding contrary state laws. If employees fail to pay required dues, they can be terminated. This will increase the number of union-represented employees and the unions’ power and financial resources.
Broadening the definition of “employees”
The PRO Act would substantially expand the definition of “employee” to include most independent contractors. Companies large and small have retained independent contractors to scale their businesses without incurring the cost of providing benefits to which employees are otherwise entitled. The Act changes this by adopting California’s strict “ABC Test” requiring employers to prove individuals (a) are free from the employer’s control, (b) perform services outside of the employer’s usual business, and (c) are engaged in the same business as called to perform. This test, especially the second prong, is very difficult to meet and will compel employers to terminate independent contractors or reclassify them as employees with the corresponding extra cost and burdens. It will also become an independent NLRA violation to misclassify workers as independent contractors (even by mistake).
Expanding joint employment
The PRO Act expands “joint employer” liability. Currently, employers, such as franchisors, are only liable as joint employers for the acts of franchisees, franchisee employees, or contractors if they have “substantial direct and immediate control” over the employees and the terms and conditions of their employment. The Act restores the broad 2015 Browning-Ferris decision and imposition of joint employer liability even if one business only indirectly controls or reserves control (without exercising control) over the terms and conditions of the other’s employment. This expansive rule will subject employers and franchisors liable for the actions of employees they don’t employ and workplaces they don’t control.
What is next?
Although The PRO Act faces many hurdles before becoming law, employers should watch its progress. The Act, with its 50+ changes to existing law, may pass in a modified form, or certain provisions could be enacted by the NLRB or DOL through exercise of rulemaking or decision-making authority. Employers should consult legal counsel to discuss how the Act could impact their businesses and proactive steps to consider.