Considerations for Working with Independent Contractors in Light of the PRO Act

On 9th March 2019, the House of Representatives passed H.R. 842, more commonly known as the PRO Act. There is a mixed response to the Act, with some in favor and others against. Despite its apparent clarity, many find it difficult to comprehend the implications of the Act. On the surface, the Act appears to secure employees’ rights, though the true impact is yet to be determined. It is therefore important to take the time to review the Act and consider its potential effects on your business and any freelancers you may be working with.

This is what the union bosses say:

  • Freelancers in the United States have no protections under the PRO Act.
  • Rather of being classified as self-employed business owners, freelancers will be considered workers.

So, what does this entail for you, a company owner?

  • As the individuals are no longer operating as freelancers, it is necessary to ensure that all benefits and protections due to an employee are provided to any US-based worker who is now officially on the payroll.
  • Instead of being an independent contractor, you’ll be tied by an employer-employee contract.

The passage of the PRO Act was intended to ensure independent contractors had legal means to assert their rights. In the near future, companies will be prohibited from misclassifying their employees as independent contractors.

In a nutshell, what does the PRO Act do?

The Protecting the Right to Organize (PRO) Act is legislation designed to safeguard the rights of employees. Union representatives have highlighted the potential benefits of the Act, such as simplifying union campaigns and elections and protecting workers’ rights.

According to the text of the proposed legislation:

Unless one of the following conditions is met, “any person rendering any service will be deemed an employee and not an independent contractor.”

It must be established that the individual is not subject to direction or control in relation to the provision of the service, either under the contract or in practice.

In addition to (A), the service must fall under (B) if it is not provided in the course of the employer’s regular business and

The individual must be regularly engaged in a recognized trade, career, profession, or business of the same type as the service being provided.

The Education and Labor Committee claims that the PRO Act would improve working conditions for all employees in its fact sheet on the act.

In What Ways Do You Anticipate the PRO Act Influencing Your Working Relationship with Independent Contractors in the United States?

Workers’ Rights to Organize and Representation Act

The National Labor Relations Act (NLRA) was introduced 85 years ago to protect the rights of employees to organise unions and take collective action to improve their working conditions. These rights were further strengthened by the introduction of the Protecting the Right to Organize (PRO) Act.

The National Labor Relations Act was originally established by Congress for the following reasons:

We seek to promote collective bargaining and to limit behaviors in the private sector which have a detrimental impact on employees, companies, and the broader US economy.

Workers who are not considered “workers” are not included in the National Labor Relations Act.

Freelancers and independent contractors in the United States are now safeguarded thanks to the Protecting Real American Workers Act (PRO Act).

Misclassifying Workers as Independent Contractors Is Illegal for Companies to Do.

Businesses are not permitted to categorize their employees as independent contractors or freelancers under the PRO Act. This approach is usually utilized by business owners to prevent staff from forming unions and gaining collective bargaining power to seek increased wages and improved working conditions.

Employers must provide evidence which meets the criteria of the “ABC” test in order to demonstrate that their employees are genuinely independent contractors.

According to these parameters,

The individual is not subject to direction or supervision in relation to the provision of the service, either as stated in the contract for the service or in practice.

In addition to (A), the service must fall under (B) if it is not provided in the course of the employer’s regular business and

Additionally, “(C) the individual is usually engaged in an independently established trade, career, profession or business of the same nature as the service provided.

You will be fined as a company owner if you cannot provide sufficient evidence that your employee is an independent contractor or freelancer.

In the future, employers and business owners will have an increased responsibility to ensure that their full-time staff are provided with adequate compensation, benefits and working conditions. This should no longer be shirked.

PRO Act’s Subpart B may require you to bring on full-time workers rather than independent contractors.

In Section “B” of the PRO Act, it is provided that:

Unless one of the following conditions is met, “any person rendering any service will be deemed an employee and not an independent contractor.”

It is noted that services which are provided outside of the normal scope of the employer’s business are deemed to be not in the course of employment.

The effect of this is to put pressure on those offering professional services as independent contractors or freelancers to take on permanent roles within their respective organizations. It is ironic, as this goes against the whole purpose of working as a freelancer.

It is of paramount importance that this change shifts the responsibility of accountability for professional service providers in the United States from the individual to the company owner. As such, they are now employees of the company and are consequently entitled to all associated benefits.

It’s more cost-effective for businesses to hire freelancers and remote workers outside the US.

As a business owner, you may be considering engaging a contractor instead of a permanent employee. As a start-up, you may not have the financial resources to commit to a full-time employee in the US at present. If this is the case, what are your options?

Hiring a freelancer based in the United States may involve additional legal obligations, so it may be beneficial to consider remote workers located outside the US. This could provide access to talented professionals without the need to navigate the complex regulations associated with the PRO Act.

It is important to bear in mind that the freelance market is a global one. The US is not the only source of highly skilled workers. The actions of a single country cannot change the current global landscape. If you need assistance locating talented individuals from different parts of the world, you may wish to consider using the services of a remote recruitment agency.

Concluding Remarks

The PRO Act appears to be quite straightforward on the surface, yet it contains a number of complexities. Depending on the perspective, this legislation may have both positive and negative implications for independent workers. It imposes a high level of binding force on commercial entities. Whether or not it will bring about any changes remains to be seen. However, if companies wish to avoid potential costs and obligations, they may consider recruiting remote workers or freelancers from outside the US. At Works, we have extensive experience in helping businesses of all sizes to find and recruit the best remote workers from across the globe. For more information, please do not hesitate to contact us.

Join the Top 1% of Remote Developers and Designers

Works connects the top 1% of remote developers and designers with the leading brands and startups around the world. We focus on sophisticated, challenging tier-one projects which require highly skilled talent and problem solvers.
seasoned project manager reviewing remote software engineer's progress on software development project, hired from Works blog.join_marketplace.your_wayexperienced remote UI / UX designer working remotely at home while working on UI / UX & product design projects on Works blog.join_marketplace.freelance_jobs