The PRO Act: What US-Based Freelancers Need to Know

A freelancer reads about the PRO Act on his laptop in USA

H.R. 842, officially known as the PRO Act, passed in the House on March 9, 2021. The PRO Act has both supporters and critics.

According to Union leaders, the PRO Act doesn’t leave US-based freelancers with any freedom. They will be treated as employees and not as independent contractors. This takes away their freedom as they will then be required to work “under” a boss at a company which defeats the whole purpose of “freelancing”.

However, there is a lot more to the PRO Act that could perhaps have been missed or misinterpreted. Supporters believe that the PRO Act gives individual contractors a voice and also disables employers from misclassifying workers as independent contractors.

Why the opposing views? Let’s first understand what PRO Act really is.

What is the PRO Act? 

House Democrats have approved a bill known as the PRO Act that provides protection for workers trying to organize. Five Republicans joined Democrats in favor of it and the final result of voting was in favor of passing the bill. 

According to Union leaders, the PRO Act would finally make union organizing drives and elections easier.

In the bill’s own words: 

“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.”.

According to the PRO Act Fact sheet by the Education and Labour Committee, the PRO Act brings workers long overdue benefits. 

How Does the PRO Act Impact US-Based Freelancers?

The Pros

  1. The PRO Act gives workers a voice

The PRO Act expands protections to workers under the National Labor Relations Act (NLRA), an 85-year-old law that protects workers’ right to join together to form unions or to engage in concerted efforts to ensure better working conditions. 

Back when the Congress passed the NLRA, the purpose was to,

“encourage collective bargaining, and to curtail certain private sector labor and management practices, which can harm the general welfare of workers, businesses, and the U.S. economy.” 

As can be seen, the NLRA covers only “employees”. Independent contractors and freelancers are not talked about. The PRO Act comes to the rescue.

  1. The PRO Act disables employers from misclassifying employees as independent contractors

The PRO Act would stop employers from misclassifying employees as independent contractors or freelancers, the way they usually do in order to prevent workers from forming unions to negotiate for better pay and working conditions.

The Act will use the“ABC” test, which is a legal test to check if the employers meet the three key criteria or not in order to prove that a worker is an independent contractor.

The criteria is,

“(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.”

This means that employers will now be more accountable for their employees and can’t evade responsibility and accountability when it comes to perks/benefits, etc to their full-time employees.

At the same time, freelancers and independent contractors have all the rights to work independently and are not bound by the employer in any way. 

  1. The PRO Act does not impact a worker’s benefits like workers’  compensation or unemployment.

The PRO Act gives workers the right to join unions no matter where they live if they are deemed employees. The legislation would be federally regulated and enforced.

The Act would not impact rules or laws in states that determine whether workers are employees or independent contractors for the purposes of determining a workers’ state income tax status or whether they’re entitled to workers’ compensation benefits or unemployment benefits.

The PRO Act does what it states. It protects the rights of workers in the United States of America.

The Cons

  1. Full-time freelancers who offer skilled services could be adversely impacted 

According to Upwork’s 2019 Freelancing in America Report: 

  • 45% of freelancers are in skilled services like marketing, computer programming, business consulting. IT, etc 
  • 60% are freelancers by choice. 
  • 51% of freelancers don’t want to take up full-time employment even if they’re paid more salaries. 
  • 53% of Gen Z and 40% of Millennials are freelancers.

The part “B” of the PRO Act states that, 

“An individual performing any service shall be considered an employee and not an independent contractor, unless—

“(B) the service is performed outside the usual course of the business of the employer”

This means that those freelancers who offer skilled services could be pushed to work “under” employers as full-time employees. These freelancers choose to be freelancers because they want to work independently and the PRO Act beats the entire purpose of freelancing.

  1. The PRO Act misses a vital detail about freelancers

Freelancers are employers too. 1.2m freelancers hired at least one employee in 2017. If a freelancer is forced to now be an employee themselves, they will not be able to hire employees. This could affect the freelance economy (which contributes greatly to the overall economy) negatively.

  1. Clients will start seeking freelancers from other nations

The freelance economy is a global one. If not from the USA, companies will look for freelancers from another region. One Act from one country won’t change the global scenario. The PRO Act could leave freelancers in the USA with very less opportunities.

The Conclusion

The Pro Act is indeed a double edged sword. It has both pros and cons for US Based freelancers. Which one outweighs the other is for time to tell. For now, the divide between supporters and critics is visible and as can be seen above, both arguments are valid. Neither can be overlooked. 

Will the bill be amended in some way for the majority to come to an agreement? Will US freelancers have to take up remote employment to safeguard their freedom while also enjoying employment perks? The solution could possibly be hidden somewhere in the challenge itself. 

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