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

H.R. 842, also known as the PRO Act, was approved by the House of Representatives on 9th March 2019, eliciting mixed reactions from the public. While some support the Act, others are opposed. Despite its seemingly clear provisions, comprehending the full implications of the PRO Act is challenging. Although it ostensibly upholds the rights of employees, its true impact remains uncertain. As such, it is essential to thoroughly evaluate the Act and its possible consequences for your enterprise and any independent contractors you collaborate with.

This is the perspective of the labour union leaders:

  • Independent contractors in the US do not have any safeguards under the PRO Act.
  • Instead of being categorized as self-employed entrepreneurs, independent contractors will now be recognized as employees.

Thus, as a business owner, what does this mean for you?

  • Since these individuals are no longer functioning as independent contractors, it is imperative to extend all the benefits and protections applicable to an employee to any worker based in the US who is now officially on the company payroll.
  • Rather than serving as an independent contractor, you will be bound by an agreement between employer and employee.

The PRO Act was enacted to guarantee that independent contractors have legal avenues to assert their rights, and in the coming days, employers will be prohibited from falsely categorizing their workers as independent contractors.

What, in brief, does the PRO Act enunciate?

The PRO Act, or Protecting the Right to Organize Act, is a statute aimed at protecting the privileges of workers. Labour union delegates have emphasized its possible advantages, including simplifying campaigns and elections for the union and safeguarding the rights of workers.

As per the wordings of the envisioned law:

Except in the case of any one of the following factors being satisfied, “all individuals providing any service will be presumed to be workers, not self-employed contractors.”

It must be determined that the person is neither subject to control nor direction with regards to service provision, whether through the agreement or in practice.

Apart from (A), the service must also satisfy (B) if it is not supplied in the regular business operations of the employer and

The person should regularly participate in a recognized profession, trade, career or occupation of the same kind as the services that are being rendered.

As per the Education and Labour Committee’s data sheet regarding the act, the PRO Act would enhance working conditions for all the workers.

What do you predict will be the impact of the PRO Act on your work association with freelancers in the United States?

Act Regarding Workers’ Right to Unionize and Legal Aid

85 years ago, the National Labor Relations Act (NLRA) was established to uphold the rights of workers to establish unions and engage in collective activity to enhance their working conditions. The Protecting the Right to Organize (PRO) Act reinforced these rights even further.

The US Congress initially passed the National Labor Relations Act for the purposes listed below:

Our aim is to encourage collective bargaining and restrict activities in the private domain that negatively affect staff, organisations, and the wider economy of the United States.

Personnel that are not classified as “workers” are not covered under the National Labor Relations Act.

With the advent of the Protecting the Right to Organize (PRO) Act, freelancers and self-employed individuals in the USA are now protected.

Labelling Employees as Freelancers by Companies is an Illegal Practice.

Under the PRO Act, companies are prohibited from classifying their personnel as freelancers or independent contractors. Business owners frequently employ this strategy to restrict employees from establishing unions and acquiring collective negotiating leverage to demand for better pay and enhanced working environments.

To demonstrate that their staff members are truly self-employed, businesses must produce proof that satisfies the “ABC” criteria.

As per these guidelines,

The individual, as specified in the service agreement or in practice, is not governed or supervised with regard to the provision of the service.

Along with (A), if the service is not provided within the normal activities of the employer, it must meet the requirement of (B), which is that

Furthermore, “(C) the individual is primarily engaged in a self-owned trade, occupation, profession or business of the same type as the service provided.

In the event that you are unable to furnish satisfactory evidence to establish that your personnel are self-employed or freelancers, as a company proprietor, you may incur a penalty.

Henceforth, it will be the responsibility of employers and business owners to guarantee that their full-time personnel receive commensurate compensation, perks, and working environments, which can no longer be taken lightly.

Subpart B of the PRO Act might mandate recruitment of full-time employees instead of independent contractors.

According to the PRO Act’s Section “B,” it is specified that:

Unless one of the following requirements is met, “any person providing any service will be considered an employee rather than an independent contractor.”

It’s important to note that services that fall outside the regular ambit of the employer’s business are considered not to be within the course of employment.

This puts independent contractors or freelancers who are providing professional services under pressure to acquire permanent positions with their organisations. Ironically, this goes against the core idea of working as a freelancer.

This alteration necessitates a shift in the burden of responsibility for providers of professional services in the United States from the individual to the business owner. Consequently, they are employed by the company and are eligible for all related benefits.

For businesses, it is more economical to engage freelancers and remote workers situated outside of the United States.

If you are a business proprietor, you might be contemplating hiring a contractor as opposed to a permanent employee. As a start-up, permanent employment in the United States may not be a financially viable option for you currently. In this situation, what alternatives are available to you?

Hiring a US-based freelancer can entail additional legal responsibilities. As a result, engaging remote workers situated outside the United States could be advantageous. This approach could allow you to gain access to skilled professionals without the added complexity that comes with adhering to the PRO Act’s regulations.

It’s crucial to recognize that the freelance market is a worldwide one, and the US isn’t the only source of skilled labor. The current global situation cannot be altered by the actions of a single nation. If you need assistance in identifying talented individuals from various regions, you might want to consider employing a remote recruitment agency.

Final Comments

Although the PRO Act might appear uncomplicated on the surface, it contains a few intricacies. Depending on one’s perspective, this legislation might have both positive and negative implications for independent contractors. It places a significant amount of legal obligation on businesses. Whether or not it has any impact on the industry remains to be seen. However, if firms want to avoid potential costs and responsibilities, they may seek out remote workers or freelancers from outside of the United States. At Works, we have substantial experience in assisting businesses of all sizes in locating and hiring the best remote workers from around the world. For additional information, please do not hesitate to get in touch with us.

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