Last Sunday, this site published a highly misleading diary attacking one aspect of the Protecting the Right to Organize (PRO) Act, a proposed law that would greatly strengthen workers’ rights to form and join unions. Posted under the byline of Kos, it was actually written by (and credited to) Kim Kavin, an affluent freelance writer who has posted only three diaries under her name since joining this site 14 months ago—all of them attacking the PRO Act. Kavin claims to speak on behalf of freelance writers and freelancers in general, but I too have been a freelance writer since 2008, and I am here to tell you that her argument that freelancers need protection from the PRO Act is wrong.
Kavin and some other freelance writers vocally oppose the PRO Act, claiming that it will destroy freelance careers and force writers into unions. Specifically, they argue that if a legal rule called “the ABC Test” (explained below) is included in the PRO Act it will give “overzealous regulators a way to attack and destroy the careers of America’s successful independent writers, photographers, editors, musicians, interpreters, therapists, teachers and more.” Hyperbole much?
According to Kavin, the proof for this contention can be found in California, because when the ABC test was adopted into state labor law there, many freelancers were allegedly harmed in these ways; thus, she argues, including the ABC Test into the PRO Act would have similar effects nationwide.
But the devil is in the details, and examining the details reveals that this argument is based on a misunderstanding (to put it generously) of the legal issues. Less generously, the argument advances a deliberate distortion of what the PRO Act does and does not do. I say “deliberate” because, as we shall see, a fairly simple legal analysis proves that the argument is false.
Fortunately, the falsehood upon which this anti-labor argument rests can be refuted rather simply. Unfortunately, doing so requires a dive into the murky world of legislative history and interpretation. First, we’ll start with a brief overview of the ABC Test itself, contrasting it with the older, predominant, common law control test. Second, we’ll examine the California law, called AB 5, to understand what the ABC Test in that law does and does not do. Third, we’ll take a look at the PRO Act to understand what its ABC Test does and does not do, and how dramatically its impact differs from that of the PRO Act. Finally, we’ll consider the Worker Flexibility Act, a proposed federal labor law that also includes an ABC Test, and which actually might raise some of the issues Kavin talks about.
I. The ABC Test v. the control test
1. The ABC Test is a legal definition that is used in state and federal law to classify workers for various purposes, as employees, independent contractors, or casual labor. Under the ABC Test, any worker or laborer performing paid work for an employer is presumed to be an employee, not a contractor or casual laborer, unless:
A. The worker is free from the employer's control or direction in performing the work;
B. The work takes place outside the usual course of the business of the company and off the site of the business;
C. Customarily, the worker is engaged in an independent trade, occupation, profession, or business.
2. The ABC Test was pioneered in 1935 as a reform to the much older common law control test, which almost all states had adopted up to that time.
3. According to John A. Pearce II and Jonathan P. Silva, the common law control test has its roots in the English common law of Master & Servant, which historian Douglas Hay describes as strongly biased in favor of employers. The control test arose in the 19th century because workers injured in industrial accidents were demanding compensation from their employers. Employers claimed they should not have to pay damages for injuries sustained by one worker because of the (mis)conduct of another worker, but the courts ruled that if the worker who caused the accident or injuries was acting under the general direction or control of the employer, then the employer was liable for the damages. (This also known as the doctrine of respondeat superior, Latin for “Let the Master answer”).
4. In the early 20th century, when states and the federal government began passing various types of labor laws, they turned to the common law control test as a handy way of defining who was an employee for purposes of labor laws. Worker advocates in both Congress and the Supreme Court wanted the courts to interpret the control test in the light of the worker-protection purposes of labor law, as the Supreme Court explained in 1944:
[W]hen the . . . economic facts of the relation make it more nearly one of employment than of independent business enterprise with respect to the ends sought to be accomplished by the legislation, those characteristics may outweigh technical legal classification for purposes unrelated to the statute’s objectives and bring the relation within its protections. N.L.R.B. v. Hearst Publications, 322 U.S. 111, 128 (1944).
5. However, in 1947, when Republicans took control of Congress for the first time in 15 years, they passed the anti-labor Taft-Hartley Act, “which rejected the statutory purpose approach and reinstated the common-law distinctions for classifying workers.” (Pearce and Silva, at 8).
6. Although a number of variants of the control test have emerged over the decades, including Restatement (Second) of Agency § 220, the economic realities test, the hybrid test, and the IRS twenty-factor test, all of these approaches are based on the common law control test. They all hinge on the issue of control. As Pearce and Silva explain, the common law control tests, including the ones listed above, are antiquated and out of date:
While some of the factors and the weight assigned to each factor differ, the tests all originate from the common law right-to-control test. Control and the other basic factors used by current legal tests for distinguishing employees from independent contractors were identified by the late 1800s, and have remained unchanged since, despite the dramatic revolution of employer-employee relationships since then. (Pearce and Silva, at 9).
7. The legal history is clear: the ABC Test, though about 85 years old, is much younger than the common law control test that Kavin and her allies falsely call more modern, which is more than 130 years old. The minor tweaks made over the years, such as the IRS 20-factor test, have done little more than to make the common law test worse, not better for workers. As Pearce and Silva explain, the reliance on ever more “factors” in determining employment status has rendered the control test vague and useless, giving judges so much discretion that nearly identical cases are often decided differently, as they demonstrate with abundant examples:
As our discussion has revealed, the legal standards used to classify workers are often confusing and ambiguous. Three primary reasons explain the confusion and ambiguity. First, it is not always clear which test is proper for use in given circumstances. Second, all of the tests require a complex multifactor analysis that can lead to different results in substantially similar factual circumstances. Third, the tests require consideration of some factors that some courts feel are inapplicable and outdated. (Pearce and Silva, at 15). (Bold type added).
8. The result is a body of law that confuses everyone and provides clear guidance to no-one. In many cases, it is impossible to predict how a given arrangement should be classified. Rampant worker misclassification has been the result, and since employers are allowed to classify their workers as they see fit, and workers have no remedy except to sue for damages later (an enormous financial obstacle), from a practical point of view employers have carte blanche under current law to misclassify workers, denying them better benefits and legal protections, with impunity. (Pearce and Silva, at 12-20).
9. The ABC Test, which is intended to reform the control test, includes a version of the older test as Prong A, and adds two additional criteria: that the work be outside its usual course of business and the worker usually follows a trade or profession. Prong B exists to make sure that employers don’t misclassify their core employees as contractors, and Prong C exists to distinguish between contractors and casual workers.
10. Here is one crucial fact to bear in mind: State and federal governments classify workers pursuant to different statutes for different purposes. State governments, for example, have rules for classifying workers for workers’ compensation, for unemployment insurance, for health care benefits, etc. Even in a particular state, different rules are often used for different purposes. The same person might be classified as an independent contractor for unemployment compensation, but as an employee for workers’ compensation. The same is true for the federal government, as the IRS, HHS, DOL, etc., have different classification systems for different purposes, some of which may be mandated by statute, others developed as regulations.
II. California AB 5 and its ABC Test
11. California Assembly Bill 5, “Worker status: employees and independent contractors,” was enacted in late 2019, but did not go into effect until January 2020. Section 2 of the law sets forth the ABC Test as follows:
2750.3. (a) (1) For purposes of the provisions of this code and the Unemployment Insurance Code, and for the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
12. The scope of AB 5 is very broad, covering working conditions, worker benefits, and employment protections, but it does not cover the right to form or join a union. As labor-side labor lawyer Brandon Magner explains,
AB 5 uses the ABC Test to presume that workers are employees for the purposes of state law, which includes laws governing wages and hours, unemployment insurance, workers’ compensation, and overtime. AB 5 does not cover private sector labor relations, such as collective bargaining, where federal law controls the field.
13. Whatever impacts AB 5 had on freelancers in California were the result of the great breadth of the scope of the application of the ABC Test in it. If a valid analogy or comparison is to be made to the PRO Act, the scope of the ABC Test in it would have to be similarly broad.
III. The PRO Act and its ABC Test
14. The PRO Act, H.R.842 - Protecting the Right to Organize Act of 2021, is a Bill currently being considered by Congress that would amend the National Labor Relations Act, the New Deal statute that recognized workers’ right to form and join unions and bargain collectively over compensation and conditions with ownership through those unions. In general, the PRO Act amends the NLRA to make it easier for workers to exercise those rights. Section 101(b) of the PRO Act states as follows:
(b) Employee.—Section 2(3) of the National Labor Relations Act (29 U.S.C. 152(3)) is amended by adding at the end the following:“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.”
15. The text at 29 U.S.C. 152(3) states how workers are to be classified for purposes of the NLRA, and nothing else. The NLRA is a federal law that guarantees a worker’s right to join a union. It has no impact on how workers are classified for any other purposes, such as taxes, unemployment insurance, health insurance, workers’ compensation, etc.
16. As a result, the comparisons between the PRO Act and California AB5 are misleading at best and dishonest at worst. This why I emphasized, at para. 10 above, the point that the purpose for which the ABC test is used under a given statute is of the utmost importance. The impact of the ABC rule, when applied broadly as with AB5, is bound to be far greater than when it is applied narrowly to a single issue like collective bargaining rights. That is why it is bogus to argue that California’s experience with AB5’s ABC test is predictive of problems that might arise under the PRO Act. Such arguments are based on a profound, and basic misconstrual, not just of labor law, but of law in general.
17. Whatever problems arose under AB 5 arose because of its broad sweep, but that’s got nothing to do with the PRO Act, whose sweep is much, much narrower. Labor-side labor lawyer Brandon Magner explains:
These predictions [“of forced unionization and ruined careers”] are unfounded. The ABC Test, if passed as part of the PRO Act, would only affect the analysis of employee vs. independent contractors status for the purposes of the NLRA. Put simply, the relevant question is whether certain workers possess rights under Section 7 of the NLRA, which guarantees employees (and employees only) the right to strike, collectively bargain, and engage in various other “concerted activities” for “mutual aid or protection.” [first italics added.]
What would the PRO Act not affect? Literally anything else. It would not change a worker’s employment status for the purposes of state laws, such as those involving minimum wage, overtime, unemployment compensation, or various benefit schemes. Thus, a worker could feasibly be classified as an employee with unionization rights under the NLRA while still qualifying as an independent contractor under said state laws. Just ask SAG-AFTRA or IATSE, who count many “freelancers” in the entertainment industry as members; they have no consistent employer but still collectively bargain for superior wages and benefits compared to non-union counterparts.
18. In light of these facts and legal analysis, the argument that the inclusion of the ABC test in the PRO Act could harm independent contractors simply cannot stand. It rests on a false comparison, itself based on the presence of functionally identical language in two statutes, language that nevertheless has completely different effects because of the completely different purposes and scopes of the two statutes.
IV. The Worker Flexibility Act and its ABC Test is the True Parallel to California AB 5—and it may need fixing
19. The Worker Flexibility and Small Business Protection Act (WFSBPA), H.R. 8375 / S. 4738, is a Bill being considered by Congress that would amend the Fair Labor Standards Act (FLSA), the other major New Deal statute on labor relations. The FLSA (29 U.S.C. § 203) is a federal labor law that establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time employees in the private sector and in Federal, State, and local governments. It does not apply to workers properly classified as independent contractors or casual laborers. The amendment proposed by the WFSBPA is as follows:
(1) STRENGTHENING EMPLOYEE TEST.—Section 3(e) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(e)) is amended by adding at the end the following:
“(6) (A) For purposes of this Act, and except as provided in paragraphs (2), (3), (4), (5), (7), and (9), an individual performing any labor for remuneration for a person shall be an employee employed by the person and not an independent contractor of the person, unless—
“(i) the individual is free from control and direction in connection with the performance of the labor, both under the contract for the performance of the labor and in fact;
“(ii) the labor is performed outside the usual course of the business of the person; and
“(iii) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the labor performed.
20. The specific statutory section being amended, 29 U.S.C. 203(e), is where the FLSA sets forth its definition of employee v. independent contractor.
21. Although the scope of the FLSA is broader than that of the NLRA, it is still not as broad as that of California AB 5. Nevertheless, in light of the fact that the ABC test set forth in the WFSBPA would impact such major issues as a worker’s eligibility for minimum wage, overtime pay, and other federal protections limited to “employees,” there is, to some extent, a proper comparison to be drawn between it and AB 5. This statute is the proper target for the complaints of these freelancers, not the PRO Act.
22. However, solid, empirical economic research on the economic impact of AB 5 is needed so that we can discuss this issue on the basis of fact. It may be that freelancers who believe their woes arise from AB 5 are incorrect, because AB 5 went into effect just two months before the COVID-19 shutdowns began, which certainly must have contributed.
Conclusion
23. The PRO Act is a Labor Law reform bill of tremendous importance to the Labor Movement, the working and middle classes, women, people of color, and the Democratic Party. Research from all around the world has demonstrated that when workers join unions, they tend to become more liberal, more supportive of a generous social safety net, civil rights, women’s rights, and more likely to vote for Center-Left or Left parties. By removing a number of legal obstacles to union organizing, the PRO Act has the potential to grow the Labor Movement in ways we have not seen since the 1930s and 1940s.
24. One of those obstacles has been employers’ rampant misclassification of workers as independent contractors, relying on the infinitely flexible common law control test as a backup justification that is never needed because of the pointlessness of litigating the issue under current law. Workers classified as independent contractors are forbidden to join unions, so the misclassification of millions of workers is a big deal to Labor.
25. The entire labor movement supports the PRO Act. That alone should be enough to convince those whose politics are truly progressive to support it—or at least not actively and vocally oppose it.
26. Indeed, one of the key lessons taught by Metoo and BLM activists is that non-women and non-Blacks need to shut up and listen when feminist and anti-racist activists explain their suffering and their proposed remedies for it. That same lesson applies in the labor context as well: when worker activists explain how they have suffered under the gig economy and how they want to fix it, non-workers need to listen respectfully, not run out and find an anti-union worker to make a pro-business, anti-Labor attack.