PRO Act Passes the House but Fate in Senate Remains Unknown

The Protecting the Right to Organize (PRO) Act passed in the U.S. House of Representatives (HR 482) March 9, seeking to redefine what constitutes an independent contractor. That move has everyone from union leaders, to small businesses trying to figure out what it means for their companies and organizations. The bill will now be debated in committee before it comes up for a vote in the Senate. The subject of contractor versus employee is one that’s gained a lot of attention lately, as the Department of Labor also weighed in back in January.

According to the bill’s text, Section 2(3) of the National Labor Relations Act (29 U.S.C. 152(3)) would be 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.”

As a point of reference, the IRS currently defines an independent contractor as “those who are in an independent trade, business, or profession in which they offer their services to the general public.” However, whether these people are independent contractors or employees depends on the facts in each case. The general rule 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 performed. The earnings of a person who is working as an independent contractor are subject to a self-employment tax. If you are an independent contractor, you are self-employed, according to the IRS.

The bill would also expand various labor protections related to employees’ rights to organize and collectively bargain in the workplace. The full text may be viewed here.

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