President Biden has continued his push to include the PRO Act as a part of his administration’s signature $2.3 trillion infrastructure package, despite opposition from within his own party’s ranks. The principal issue at hand is the legislation’s worker-classification provision, better known as the ABC test, which, if implemented, would have a devastating impact on the small business community.
The imposition of the ABC test would greatly narrow the definition of what constitutes an “independent contractor” in the National Labor Relations Act (NLRA). Under the new definition, many of these workers would be forced to reclassify as employees unless they meet the stringent requirements of the three-part test.
This change would eliminate the wide latitude employers and independent contractors currently enjoy in determining the terms of their relationship. These agreements generally offer a great deal of flexibility for both the workers and the businesses. But under a national ABC test, this mutually beneficial relationship would deteriorate rapidly. Indeed, this sentiment was recently echoed in a memo released by two former members of the National Labor Relations Board (NLRB).
Under the new classification system, the memo authors argue, “one or both participants will decide that (the new) ‘employer-employee’ relationship is objectionable, impractical or infeasible.” Due to the changes made by the ABC test, many businesses would be forced to sever their otherwise healthy relationships with contractors. This seismic regulatory shift would cause all sorts of unintended issues.
An ABC test is by no means an accurate or appropriate method to classify workers, especially when a majority of independent contractors do not want to be hired as someone’s employee. Now, this test has extended past the PRO Act and President Biden’s infrastructure package, and into Senator Wyden and Senator Bennet’s Unemployment Insurance Modernization Act. While the bill’s supporters say that the ABC test is necessary to cover workers that might fall through the cracks, the reality is a federal ABC test in law anywhere threatens workers everywhere with lost income.
Requiring that independent contractors reclassify as employees through the PRO Act or Unemployment Insurance Modernization Act would effectively heap a massive burden of chaos with changing models and practices for businesses across the country. The business community has already endured a great deal of pain thanks to the lockdowns brought on by the pandemic. The last thing they need is additional regulatory baggage—yet, that is precisely what the PRO Act would provide. Without question, the ABC test is a poor benchmark for unemployment insurance consideration and qualification. It’s a disaster waiting to happen—and for that reason, Congress mustn’t pass it.
