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Protecting the Right to Organize Act – PRO Act

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The Protecting the Right to Organize Act, or PRO Act, is a proposed United States law that would amend previous labor laws such as the National Labor Relations Act, for the purpose of expanding labor protections related to employees’ rights to organize and collectively bargain in the workplace. It would prevent employers from holding mandatory meetings for the purpose of counteracting labor organization, and it would strengthen the legal right of employees to join a labor union. The PRO Act would weaken “right-to-work” laws, which exist in 27 U.S. states. It would allow the National Labor Relations Board to fine employers for violations of labor law and would provide compensation to employees involved in such cases.

Background

The Protecting the Right to Organize Act, also known as the PRO Act, follows a series of past legislation passed by Congress concerning labor rights. A number of landmark bills were passed during the New Deal period, including the Fair Labor Standards Act of 1938, which President Franklin D. Roosevelt considered one of the most important Acts of Congress at the time.

Following the New Deal, a number of bills were passed which restricted the activities of labor unions. Among these was the Labor Management Relations Act of 1947 (commonly known as the Taft-Hartley Act), which among other things prohibited secondary boycotts and closed shops.

In 2009, the Employee Free Choice Act, another bill which would have amended the National Labor Relations Act, failed to pass.

In the State of California, following the passage of California Assembly Bill 5, Proposition 22 was passed in 2020. Proposition 22 was intended to classify so-called gig workers for app-based companies (such as Lyft, Uber, DoorDash and Postmates) as “independent contractors” rather than full employees.

Content of the PRO Act

The PRO Act would amend the National Labor Relations Act of 1935 (also known as the Wagner Act), the Taft-Hartley Act, and the Labor-Management Reporting and Disclosure Act of 1959 (also known as the Landrum–Griffin Act).

According to the summary text of the PRO Act, it revises definitions under labor law, permits labor unions to encourage participation in secondary strikes, and prohibits employers from litigating against unions which conduct such secondary strikes:

Among other things, it (1) revises the definitions of employee, supervisor, and employer to broaden the scope of individuals covered by the fair labor standards; (2) permits labor organizations to encourage participation of union members in strikes initiated by employees represented by a different labor organization (i.e., secondary strikes); and (3) prohibits employers from bringing claims against unions that conduct such secondary strikes.

The PRO Act would prevent employees seeking to join a labor union from being fired. It would also allow unions to override “right-to-work laws”, allowing labor unions to collect dues from all employees in a workplace, regardless of whether or not they are a member of a labor union. Right-to-work laws exist in 27 U.S. states, and the PRO Act would weaken these laws in favor of workers. It would also make illegal company-sponsored mandatory meetings used to counteract and discourage attempts at labor organization. The PRO Act would classify some workers who are classified now as “independent contractors”, instead as “employees”. The bill would amend the National Labor Relations Act to define an employee as:

“An individual performing any service shall be considered an employee (except as provided in the previous sentence) 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.”

This definitional amendment would allow for certain workers, such as those working in the gig economy, to attain the right to form a labor union or to bargain collectively. This would potentially include those who work for app-based companies such as Uber, DoorDash, or Lyft, and overall could include hundreds of thousands or millions of workers. The bill would allow for workers to sue employers and would make it easier for employees to join a union.

Support for the PRO Act

A letter signed by over 100 labor unions, advocacy organizations, churches, and political groups supported the PRO Act. This included but not limited to the AFL-CIO, EPI, Public Citizen, AFT, Sunrise Movement, CPD, SEIU, PFAW, CWA, FoEI, HRW, USW, IWPR, GBCS, IFPTE, NETWORK, Patriotic Millionaires, and Oxfam. Richard Trumka of the AFL-CIO said, “If you really want to correct inequality in this country … passing the PRO Act is absolutely essential to doing that.” The bill has received backing from the Labor Caucus and The Leadership Conference on Civil and Human Rights. Joe Biden endorsed the PRO Act, and has called labor law reform one of the top priorities of his administration.

Legislative Activity

On February 4, 2021, Rep. Bobby Scott (D-VA-03) introduced the Protecting the Right to Organize Act of 2021 in the House of Representatives. Of the bill’s 213 cosponsors, 3 – Brian Fitzpatrick (PA-01), Jeff Van Drew (NJ-02), and Chris Smith (NJ-04) – were Republicans; the other 210 were Democrats.

The bill passed in the House of Representatives by a vote of 225 to 206 on March 9, 2021. Five House Republicans (Brian Fitzpatrick, John Katko, Chris Smith, Jeff Van Drew, and Don Young) joined the House Democrats in voting for it, while one Democrat (Henry Cuellar) voted against it. The bill now advances to the U.S. Senate; however, the bill is unlikely to pass as it would require universal Democratic support and 10 Republican crossover votes to pass in case of a filibuster.

Photo by Thibault Penin on Unsplash

Final Rule: Independent Contractor Status under the Fair Labor Standards Act

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29 CFR Parts 780, 788, and 795

A final rule clarifying the standard for employee versus independent contractor status under the Fair Labor Standards Act (FLSA) was announced by the Department of Labor (Department) on January 6, 2021. The effective date of the final rule is March 8, 2021 and includes a multi-factor test for determining whether workers are independent contractors, meaning that the business they perform work for doesn’t have to pay minimum wage or overtime that the Fair Labor Standards Act requires for employees.

Clarifications in the final rule

  • Sets forth an “economic reality” test to determine whether an individual is in business for him or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee.)
  • Identifies and explains two “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself:
    • The nature and degree of control over the work.
    • The worker’s opportunity for profit or loss based on initiative and/or investment.
  • Identifies three other factors that may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification. The factors are:
    • The amount of skill required for the work.
    • The degree of permanence of the working relationship between the worker and the potential employer.
    • Whether the work is part of an integrated unit of production.
  • Provides that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
  • Provides six fact-specific examples applying the factors.

The final rule was published in the Federal Register on January 7, 2021.

Will the independent contractor status Rule be permanent? 

The rule clarifying independent contractor status is scheduled to become effective on March 8, 2021. However, a spokesperson for the Biden administration called out the rule as one that the administration is likely to revise in the days before its publication, bringing into question whether it will ever be permitted to take effect. In addition, independent contractor/employee status has been the topic of a great deal of litigation in recent years, so we can expect to see challenges should the rule is permitted to take effect.

Contractor or Employee? California Legislature Decides.

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Is your Uber driver a contractor or employee? What about the person delivering your favorite meal through DoorDash? California legislators passed a bill, called AB 5, on September 11 requiring employers that utilize contract workers to perform ‘gig’ type work, to change the status from contractor to employee. Governor Gavin Newsom has not signed the bill, though it is expected he will after current negotiations are resolved. Primarily this includes ride-hail drivers (like Uber and Lyft) and delivery couriers (like DoorDash) but could become more far-reaching. Other possible occupations include nail salon workers, janitors, construction workers, home repair, and telemarketers. Some exemptions* in California already exist.

Contractor or employee – ABC guidelines

There are ABC guidelines that establish the classification of an independent contractor. These workers would not be considered employees:

(A)  free from the control and direction of the hiring entity – in fact as well as by contract;

(B) the work performed by the person is outside the usual course of the hiring entity’s business; and

(C) the person hired is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. 

This definition of an independent contractor does not generally fit ride-hail and delivery drivers.

Worker benefits

Currently California contract workers do not receive employee benefits such as vacation time, paid sick days, overtime, and reimbursement of expenses. As employees, they would receive these plus the ability to unionize and eligibility for unemployment insurance and workers’ compensation. They would have the security they currently lack. 

Employer objections to AB 5

Some employers, such as Uber, have proposed similar benefits without the classification as employees. They stress the flexibility workers currently have that they may lose as employees. Some small, often family businesses such as vineyards, or auto shops, are fearful of the effect it could have on their businesses.

The larger companies, such as Uber, threaten that this law can lead to eliminating many drivers – especially those in low traffic areas that would not justify the benefits of an employee. They also suggest schedules might need to be initiated, ridding drivers of the flexibility they desire. Experts, however, say the bill does not require set shifts, with Uber and Lyft entitled to continue letting drivers make their own schedule decisions. In fact, it would be strategic to use incentives, such as bonuses, to ensure there are sufficient available drivers at certain times and in certain places.

Current status

  • In last minute ammendments, California legislators gave larger cities the right to sue if companies don’t comply.
  • Uber, Lyft, and DoorDash pledged $90 million to support a ballot initiative that exempts them from the new law.
  • Though most drivers support the bill, many oppose it from fear it will limit their flexible schedules.
  • In July and August, Uber and Lyft worked on an agreement between labor groups and the governor’s office to establish a new category between contractor and employee while giving a minimum wage and the right to organize. The negotiations disintegrated, but company officials are optimistic a deal can be negotiated after the bill is passed.

Beyond California

New York, Alaska, and Oregon – and almost half the states –  already determined ride-hailing drivers were employees under current state laws for specific purposes. However, these findings could be overturned by new state laws clearly identifying drivers as contractors. 

There are still hurdles to make this a law across the country. For now, California with AB 5 is setting the standard, and it will be an example to other states as they deal with this massive change in the current working environment of millions of workers in California alone.

When this bill becomes law, we anticipate a law that gives security, benefits, and confidence to all contract workers in California.

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Exemptions

Specific categories of workers:

Includes (i) individuals licensed by the Department of Insurance; (ii) real estate licensees; (iii) physicians, surgeons, dentists, podiatrists, psychologists and veterinarians licensed by the State; (iv) licensed lawyers, architects, engineers, private investigators and accountants; (v) securities broker-dealers and investment advisors and their agents/representatives registered with the SEC or FIRA or licensed by the State; (vi) direct salespersons who otherwise meet Unemployment Code conditions;  and (vii) certain commercial fishermen.

Six-part test for exemption in the fields of graphic design, marketing, writing, editing, freelance photography, and human resources:

  1. Maintain a separate business location (which can be their home);
  2. Have a business license in addition to any required professional licenses;
  3. Have the ability to set or negotiate their own rates;
  4. Set their own hours (other than project deadlines);
  5. Customarily engage in the same kind of work with another entity or holds themselves out to other potential customers for the same kind of work; and
  6. Customarily and regularly exercises discretion and independent judgment in the work.

The Construction Industry Under the Fair Labor Standards Act (FLSA)

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Businesses involved in the construction industry are engaged in the activities of new construction or reconstruction. The repair or renovation of existing commercial and/or residential structures, as well as roadway and bridge construction, are also a part of this industry. The following work activities are included in the construction industry: painting, sandblasting, tuckpointing, roofing, guttering, spouting, water well drilling, installation of flooring and landscaping. 

Requirements for construction industry 

Employers who are covered under the FLSA must comply with the recordkeeping requirements of Regulations, 29 CFR Part 516.

Also, an employer must establish a workweek (7 consecutive 24-hour periods) and must pay overtime when hours worked exceed 40 in the workweek. The practice of paying overtime only after 80 hours in a bi-weekly pay period is illegal since each workweek must stand alone. 

For non-exempt employees, covered employers must pay the Federal minimum wage and time and one half the regular rate of pay for time worked over 40 hours in a workweek. These businesses must also be aware of the potential for violations of the youth employment requirements of the FLSA. This is especially critical due to the dangerous nature of both the work performed and the tools used in this industry.

If the employer performs work on a federally financed project or a project in which the Federal government has provided assistance in financing the project, a different and somewhat stricter set of labor standards applies. Typically, this would require that employees performing on such contracts be paid a “prevailing wage rate”.

Youth Minimum Wage: The 1996 Amendments to the FLSA allow employers to pay a youth minimum wage of not less than $4.25 an hour to employees who are under 20 years of age during the first 90 consecutive calendar days after initial employment by their employer. The law contains certain protections for employees that prohibit employers from displacing any employee in order to hire someone at the youth minimum wage.

Typical Problems

(1) Failure to record all hours actually worked to include time spent working before or after the shift. (2) Shorting of hours by using terms such as down time or rain delay. (3) Failure to compensate for meal breaks where the employee is not completely relieved of all duties to enjoy uninterrupted time for the meal. (4) “Banking” of overtime hours or payment of overtime in the form of “comp time”. (5) Failure to combine the hours worked for overtime purposes by an employee in more than one job classification for the same employer within the same workweek. (6) Failure to segregate and pay overtime hours on a workweek basis when employees are paid on a bi-weekly or semi-monthly basis. (7) Failure to pay for travel from shop to work-site and back. 

Other Pertinent Labor Laws

(1) The Immigration Reform and Control Act requires employers to complete and maintain I-9 forms to verify the employment eligibility of all individuals hired after November 6, 1986. (2) The Wage Garnishment Law limits the amount of an individual’s income that may be garnished and prohibits firing an employee whose pay is garnished for a single debt. (3) The Employee Polygraph Protection Act prohibits most private employers from using any type of lie detector test either for pre-employment screening or during the course of employment. (4) The Family and Medical Leave Act requires covered employers to provide eligible employees up to 12 weeks of unpaid, job-protected leave each year for specified family and medical reasons. (5) The Davis-Bacon and Related Acts require payment of prevailing wages on federally funded or assisted construction projects.

Supreme Court Considers Class Arbitration in Employment Law Claims

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On October 29, 2018, the Supreme Court heard oral argument concerning class arbitration in employment law claims in Lamps Plus, Inc. v Varela. What’s on the line? Whether general arbitration clauses in employment contracts preclude the right to a collective or class arbitration.

Cases affecting class arbitration in employment law claims

Dallas employment law attorney, Ben DuBose, says “Last year, the Supreme Court’s Epic Systems ruling struck a big blow by holding that arbitration clauses in employment papers override a worker’s rights to bring Fair Labor Standards Act claims in the court system.” Now, DuBose says, “Lamps Plus could further whittle down worker rights.”

The lower appellate court found against Lamps Plus by holding that the general arbitration clause, which did not expressly state it prevented collective or class arbitration, because of its ambiguity permitted class or collective arbitration.

While Lamps Plus does not directly involve Fair Labor Standards Act (FLSA) claims, its impact could apply to a broad range of employment law based claims.

The combination of last year’s Epic Systems ruling which held that forced arbitration clauses are enforceable in employment contracts, coupled with an adverse ruling in Lamps Plus would result in employees only being able to bring individual cases in arbitration – absent express language in an arbitration clause consenting to class arbitration.

Employee rights at stake

In an arbitration, the parties give up their 7th Amendment right to a trial by jury as well as their right to appeal on substantive grounds to a court of law. Instead, arbitration takes place outside of the court system with a private arbitrator, often selected by the employer per the terms of the arbitration clause.

Questioning from the Court during oral argument suggests the Court will be closely divided on what standard should be applied to determine parties have agreed to class arbitration. The Lamps Plus decision will be issued during the spring or early summer of 2019.