The PRO Act and How it Could Change the Construction Business
The U.S. House of Representatives approved the “Protecting the Right to Organize Act” – PRO Act, earlier this month. This legislation expands protections for labor union organizing and collective bargaining. The bill comes at a time when workers at an Amazon facility in Alabama are considering organizing. If the Amazon employees in Alabama choose to unionize, they would be the first of Amazon’s one million employees to do so.
About 10.8% of U.S. wage and salary workers were union members in 2020, about half the level of the 1980s, according to government figures. 1.
In the construction industry the use of workers now considered “independent contractors” saves contractors money over hiring employees by eliminating the need to provide health care benefits, worker’s comp, retirement benefits as well as eliminating the need to withhold taxes.
The guidelines that many contractors follow in determining if an individual is an independent contractor come from the Internal Revenue Service, which focuses on the level of control the hiring contractor has over the independent contractor. “The general rule,” the agency says, “is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” 2.
The PRO Act also expands unionization rights and changes the classification of workers as employees unless the following three criteria are met:
- 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.
- The service is performed outside the usual course of the business of the employer.
- 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. 2.
The second rule would particularly be a problem for the construction industry. A contractor who supplements his crew because of occasional or seasonal demand, would be required to classify that worker as an employee. Fines would quite substantial, $50,000 – but could go higher.
Not surprisingly, the Industry is opposed to the PRO Act. The AGC, Associated General Contractors of America estimates that it would increase costs for employers by over $12 billion each year.
A cautious tale can be told about a similar effort in California with the passage of AB5 which went into effect at the beginning of 2020. Because of backlash from businesses and independent contractors, the bill saw many parts of the new regulation pulled back from the original. The sudden change to business economics risked chaos and couldn’t be implemented the way it was written.
The PRO Act previously passed the Democratic controlled House last year but was never introduced in the Senate. The Democrats’ narrow majority this time around won’t be enough to overcome a filibuster. President Biden came out in support of the bill and in support of the efforts of the Amazon employees in Alabama to unionize.
The bottom line for the industry is that it is very unlikely the bill will go any further. Without the ability to overcome the filibuster, the bill will likely be dead on arrival to the Senate. There’s no doubt the efforts to encourage worker’s efforts to unionize will continue to be a hot subject but any effort to reform workers’ rights will require a less disruptive approach… just as California learned with AB5.
1. Reuters
