The PRO Act is back.

Federal legislators this week introduced the Richard L. Trumka Protecting the Right to Organize (PRO) Act of 2023 in both the U.S. Senate and the House of Representatives.

While the main intention of the bill is to strengthen unions and encourage more workers to organize, the act contains language that would likely compel the reclassification of many current independent contractors to employees under the National Labor Relations Act (NLRA).

That, critics say, could have an effect on business models and livelihoods in the promotional products industry, though there are doubts that the act will make it into law given Congress’ current partisan configuration.

The Potential Effect on Promo

As proposed, the PRO Act of 2023 would amend the NLRA to establish that a worker performing any service is an employee and not an independent contractor unless: The worker is free from the employer’s control 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; and 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.

Promo uses independent contractors in a variety of ways, including as distributor salespeople, multiline supplier reps and even as freelance graphic designers and content creators. If the PRO Act became law as proposed, it’s possible such workers would have to be considered employees under the NLRA.

“This could, for instance, cause most if not all salespeople to be considered employees,” says Chuck Machion, senior vice president and senior counsel at ASI. “It stands to impact independent contractor salespeople in our industry.”

Employees tend to cost companies more than independent contractors. Having to reclassify such professionals as employees could increase industry firms’ labor costs at a time when inflation and labor costs remain high and/or compel companies to part ways with many of those currently classified as independent contractors, leading to promo professionals being put out of work.

“It’s not just a binary question of ‘employee’ vs. ‘independent contractor,’” says Machion. “The third option is ‘none of the above.’”

Applicability Questions

Proponents of earlier incarnations of the PRO Act have argued that it would not decimate independent contracting.

They’ve said that, in practical effect, the legislation would still allow a worker to qualify as an independent contractor under state laws but give that worker the status of an employee under the National Labor Relations Board (NLRB). If employee-classified in relation to the NLRB, independent contractors would have the right to strike, collectively bargain and undertake other union-style organizing/activities as established in the National Labor Relations Act.

Nonetheless, certain leery PRO Act critics don’t buy the line of reasoning that the application of the employee classification would be limited in scope. They argue that employee status under NLRA could be the legal foundation for broad reclassification of independent contractors as employees under all areas of labor, employment and tax law.

“The result would be to outlaw millions of independent contractors,” a freelance journalist wrote for Forbes amid debate on an earlier version of the PRO Act in 2021.

Notably, the National Federation of Independent Business has expressed opposition to the PRO Act of 2023, calling it “an expansive piece of legislation that would dramatically upend long-standing employment laws in favor of labor unions at the expense of small businesses and their employees.”

‘Doubtful’ the Legislation Will Pass

Back in 2021, another version of the PRO Act caused a stir in the promo products market and in business circles more broadly due to concerns over independent contractor reclassification and other factors.

Republican opposition in the Senate, along with lack of bill co-sponsorship support from Democrat Sen. Mark Kelly and then Democrat-now-Independent Sen. Kyrsten Sinema, were key factors that prevented the 2021 legislation from passing in Congress, though the House approved the bill. Both the Senate and House must pass a bill for it to go to the president to be signed into law.

ASI’s Machion is among the analysts who think Republican legislators could again stymie the PRO Act in 2023. “While it remains to be seen what will happen, it’s doubtful at this point that this would pass in the Republican-controlled House,” Machion opines.

According to federal records, the 2023 act has been referred for further consideration to the House Committee on Education and the Workforce.

Supervisor Status Change

Among other changes, the proposed PRO Act of 2023 also aims to ensure that employees are not wrongly classified as supervisors and denied protections under the NLRA. It does this, in significant part, by defining a “supervisor” as a worker who executes supervisory activities for the majority of their worktime. The PRO Act also modifies a list of supervisory activities in the NLRA to remove the individual’s authority to “assign” and “responsibly to direct” employees as being a determinant of supervisor status.

The act also says it aims to protect employees who have multiple employers. It states that two or more persons shall be considered employers under the NLRA if each codetermines or shares control over an employee’s essential terms and conditions of employment. In applying this standard, the NLRB or a court of competent jurisdiction must consider as relevant direct control, indirect control, reserved authority to control, and control exercised in fact.

The Labor Department’s Proposed Rule Change on Independent Contractor Status

Debate over how to classify independent contractors has been a hot topic at the federal level of late.

In an undertaking that’s separate from the PRO Act, the U.S. Department of Labor is considering a proposed rule to revise its guidance on how to determine who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The effect of the rule would be that many people currently classified as independent contractors would likely have to be considered employees under FLSA, analysts say.

In promo, that proposed change has received criticism that echoes the outcry over the PRO Act. Critics have said the rule, if enacted, would upend sales models that suppliers, distributors and multiline reps in promo rely on to keep business moving and make their livelihoods. Still, in speaking about the Labor Department’s proposed rule, some independent contractors in promo have also said there should be better protections in place to help them get the compensation and benefits they feel they deserve.

A public comment period on the proposed rule concluded Dec. 13, 2022. The Labor Department is currently reviewing comments before issuing a final proposed rule.