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Jeopardized business model: PRO Act may not have pros for independent contractors

Jeopardized business model: PRO Act may not have pros for independent contractors
Facebook groups — Mayday 2020 and The Disrespected Trucker — held a protest May 1-3 in Indianapolis to bring attention to their opposition to the PRO Act. Many owner-operators oppose the PRO Act because it eliminates their opportunity to maintain an independent contractor status because of the second prong of the ABC test that would be required under the act.

The Protecting the Right to Organize (PRO) Act is set to be a big win for unions and pro-union supporters. However, a nugget included in that legislation is set to change the way owner-operators, and the companies that employ them, do business.

The PRO Act proposes a three-pronged test, also known as the ABC test, for determining independent contractor status:

  1. 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;
  2. The service is performed outside the usual course of the business of the employer; and
  3. 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.

The PRO Act can be easily compared to California’s Assembly Bill 5 (AB5), which passed in 2019. AB5 holds the same prongs for independent contractors to meet as the PRO Act.

With the ABC test, if an independent contractor works with a business that transports goods, that will qualify as “the same course of business” and would fail to meet the “B” prong of the test. Under the PRO Act, those contractors could no longer be considered independent, but instead would be treated as employees.

“If you’re a trucking company, and your job is to deliver freight, why would you hire an independent contractor to deliver that freight?” asked the Truckload Carriers Association’s (TCA) Vice President of Government Affairs David Heller. “This law would say that you aren’t allowed to do that. You would have to make independent contractors employees, and quite frankly, they don’t want to be employees. This PRO Act jeopardizes that business model and would actually put an end to the trucking version of the American dream.”

The bill changes the original definition of independent contractors, generally considered as those whose payers have the right to control the result of the work, but not what will be done or how it will be done, according to the Internal Revenue Service (IRS).

The PRO Act is part of President Joe Biden’s American Jobs Plan — an overarching infrastructure proposal — but it could actually overturn jobs in the trucking industry.

Lisa Schmitt and her husband, Lee, own a truck and are leased to a motor carrier.

“We have two choices,” shared Schmitt. “We can either quit trucking — which is what a lot of (owner-operators) will do — or get your own authority, and that’s not always the best way.”

Jeremy Johnson, a truck driver and administrator of the Facebook group The Disrespected Trucker, has already decided he will leave the trucking industry if the PRO Act is implemented. He owns his truck and is leased to a company that primarily uses owner-operators.

“Guys like me, lease-term owner-operators, will have to go get our own authority and insurance and we — or I can’t — afford to go buy my own trailer and get my own insurance paid for my own authority,” said Johnson.

Johnson has been organizing protests at state capitals regarding the PRO Act and other issues in the trucking industry for three years. Most recently, he helped to organize a “May Day” protest, held May 1-3 in Indianapolis, to bring awareness to many truckers’ opposition to the PRO Act.

“This will completely upend the trucking industry,” he said.

It is unclear whether owner-operators will be forced to get their own authority, according to Owner-Operator Independent Drivers Association (OOIDA) Director of Legislative Affairs Bryce Mongeon. However, he does suspect the costs associated under the PRO Act will be prevalent for companies who must hire independent contractors as employees, as well as for independent contractors who have made the investments of buying equipment.

To complicate the matter, companies would be required to provide the newly elected employees benefits and an equitable pay structure. Many companies could not afford this.

Diamond Transportation Systems, Inc. President and TCA Officer Jon Coca confirmed that the PRO Act could mean unemployment.

“We run a much bigger risk of simply having to close our doors,” he said. “Our insurance and benefits would have to stretch much longer than they are, and we’d have to redo all of our contracts. I don’t know if that’s feasible, when they’re owning their own equipment. To pay them a certain percentage of earnings or margins that are already so small and tight, the added extra expense to us would put us under.”

Many other carriers using an independent contractor business model could also be at risk.

However, Coca, TCA, and OOIDA said it is unlikely the PRO Act will ever pass. The bill did pass in the U.S. House of Representatives March 9; however, it is unclear when it will be moved out of the U.S. Senate Committee on Health, Education, Labor, and Pensions.

In order to pass the Senate, there must be 60 votes to overcome a filibuster that may be proposed by opponents of the bill. This would mean there must be 10 Republicans supporting the bill for it to pass.

California’s AB5 had been blocked from being enforced against motor carriers after a request from the California Trucking Association (CTA) to place a preliminary injunction.

However, an April 28 ruling by the Ninth Circuit Court of Appeals overturned the injunction, and CTA has asked for a rehearing of the case.

The national-level PRO Act is dedicated to reshaping certain labor laws and would also eliminate right-to-work protections, which prohibit employees from being persuaded to pay union fees as a result of their employment. Twenty-seven states have right-to-work laws.

The PRO Act could also prevent an employer from replacing a worker who has gone on strike, paving the way for more picketing and strikes, and allow a panel to broker agreements if an issue has not been resolved within 120 days.

“It would allow independent contractors the right to organize, which basically says it would allow them the right to become a union — which quite frankly is the very antithesis of what an independent contractor is, because they are their own businessman,” added Heller. “They negotiate their own rates; they advocate their own time; and allowing them to become union would be the direct opposite of what they actually want to be.”

 

Hannah Butler is a lover of interesting people, places, photos and the written word. Butler is a former community newspaper reporter and editor for Arkansas Tech University's student newspaper. Butler is currently finishing up her undergraduate print journalism degree and hopes to pursue higher education. Her work has been featured in at least nine different publications.
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