A B C bubble

The Protecting the Right to Organize Act of 2021 (PRO Act) (H.R. 842) passed the House of Representatives Tuesday night by a vote of 225-206, with mostly Democratic support, paving the way for the Senate to consider the bill (S. 420), where it is expected to face strong opposition from the Republican minority despite having 45 Democrat co-sponsors. The PRO Act amends the National Labor Relations Act (NLRA) by providing stronger collective bargaining rights and expanding the group of workers who qualify for collective bargaining. If enacted, it would create major changes to U.S. labor law.

Many of you have written to us asking about how the PRO Act will affect you as a freelance journalist or author and expressing concern about its consequences for freelance and independent contract work. There is a good deal of incorrect or misleading information about this legislation online fueled by a misunderstanding of the provisions of the PRO Act, as well as the anti-union and Uber/Lyft lobbies.

The Authors Guild has been closely following the PRO Act with interest for two reasons:

  • We have been advocating for collective bargaining rights for freelance writers and other creators for several years, and the PRO Act allows some freelancers to collectively bargain.
     
  • The PRO Act contains an “ABC” test to determine what independent contractors (1099 workers) are eligible to collectively bargain. The Authors Guild does not agree that it is the right test to determine whether creative freelancers have the right to collectively bargain, and there is some concern that the same standard will be adopted to determine whether an individual is an independent contractor or employee for other purposes.

What the PRO Act Does Not Do

There has been a lot of online hype that the PRO Act uses the ABC test to create a national worker classification law. It does not. It amends the federal labor law that provides collective bargaining rights and governs the National Labor Relations Board, and nothing else. Coverage under the NLRA does not directly affect employment status for any other law. However, we are sympathetic to concerns that federal agencies and states might look to the PRO Act language as a model and adopt the ABC test as well, although it should be noted that the Department of Labor and the IRS both continue to use more complex common law multi-factor balancing frameworks. To be clear, the Authors Guild does not support using the ABC test to classify freelance writers as employees for taxes, benefits, and other employment law purposes and will continue to fight for clear professional services exemptions for freelance writers both at the state and federal level.

A Little Background on the ABC Test and the Problems It Can Cause When Used Broadly to Classify Workers

The ABC test gained notoriety last year when California incorporated it into a worker misclassification law referred to as “AB5” to distinguish between employees and true independent contractors. California, like many other states, previously used a common law balancing test to determine a worker’s status, and like most balancing tests, it contained a gray area that gave employers some wiggle room. Gig employers in some fields have abused the lack of bright-line clarity and refused to treat workers as employees where they clearly should be. As a result, they have been able to hire workers for less than minimum wage, without benefits, and without paying unemployment or other employee taxes. While the impetus for the California law was a good one—to prevent gig workers from being mistreated through misclassification and denying them corporate benefits or legal protections like minimum wage, unemployment compensation, or workers compensation—the problem is that, by itself, the ABC test is too broad and sweeps in too many independent workers.

Here is what the three-part ABC test says:

An individual performing any service shall be considered an employee and not an independent contractor, unless—

  • 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; 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.

Under this test, to be deemed an independent contractor (or self-employed) and not an employee, a worker must meet all three ABC criteria. For writers in particular, subsection B creates a problem: a journalist writing for a newspaper, magazine, blog, etc. is generally performing a service that is core to the “usual course of business of the employer.” As such, if the ABC test is the only provision that carves out independent contractors, freelance writers for news and other media companies will have to be treated as employees.

California did provide some additional exceptions in the initial law for certain kinds of professional services, including journalism and freelance writing, but these also suffered from flaws, such as a limit of 35 submissions per employer, which was in place before author and freelancer groups successfully lobbied for an amendment to remove the submission threshold. Moreover, there are simply too many qualifications that a worker must meet under those additional exceptions, and some are unclear, creating trepidation about hiring freelancers among employers as a result since inadvertent misclassification could result in heavy fines and costs for them.

What Is the Problem with Writers Being Treated as Employees Under a State Worker Classification Law? Isn’t It a Good Thing?

There are a number of reasons that freelance writers and other creative freelancers might not want to be treated as employees under state law:

  • Employees do not get to keep their copyrights (unless a contract provides otherwise) and are not even considered the “author” of the work under the Copyright Act. This means that they do not retain any rights in their work (whereas a freelance journalist working as an independent contractor can get publishing rights back after an initial exclusivity period and retain other rights, such as audio, video, and book rights), nor do they have the right under section 203 of the Copyright Act to recapture their rights after 35–40 years. An employee can always try to negotiate the ability to obtain ownership of their copyrights, but good luck with that—especially with no collective bargaining!
  • Employees cannot deduct business expenses under the current tax code (on the other hand, they do not have to pay self-employment taxes).
  • Many companies do not give employees flexibility of working hours and workplace, although that is due to company policy, and there is nothing legally preventing companies from letting employees like writers (who generally can write anywhere) work on flexible schedules and telecommute.

In addition to control of copyright and flexibility in work conditions, freelance writers are also justifiably concerned that more rigid rules around employment classification deter businesses from hiring them, as the businesses fear liability for paying taxes and benefits. Some California-based freelancers, for instance, saw work evaporate under the original AB5 because the publications they had previously worked for did not want to risk having to classify these writers as employees and instead hired freelancers from other states, or used existing employees to do the work. This is why we worked with others to get clear exemptions for authors and freelance writers from the ABC test in California and other states.

What Does the PRO Act Do and Why Does It Use the ABC Test?

The PRO Act amends the NLRA by providing stronger collective bargaining rights and expanding the group of workers who qualify for collective bargaining. The Authors Guild has long been lobbying for collective bargaining for freelance writers and creators and supports the aspects of the PRO Act that expand collective bargaining—but with some changes, as described below.

The principal operative provision of the NLRA for employees is Section 7, which guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right “to refrain from any or all such activities.” Section 8(a)(1) bolsters that right by making it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the Act. 

“Employees” is a defined term in the NLRA, and sections 7 and 8 only apply to individuals that fall within that definition of “employee,” which is: “any employee… unless this subchapter explicitly states otherwise.” Independent contractors, as defined in the NLRA, are one of the categories carved out and excluded from the definition of employee. The definitions section clearly states that the definitions are for purposes of the NLRA—not for any other purpose. The PRO Act expands the pool of individuals covered by that provision by adding to the definition of “employees” those individuals who provide services (including erstwhile independent contractors) and do not meet the three requirements of the ABC test.

What this means is that, if the PRO Act is enacted, independent contractors will be given rights and protected under the NLRA as if they were employees—i.e., the rights to form and join unions and collectively bargain, unless:

  • they are free from control and direction in the performance of their service;
  • their service is performed outside the usual course of the business of the employer; and
  • they are customarily engaged in that type of service as an established trade, occupation, profession, or business.

Freelance writers and authors who write for publications where the publications are the usual course of business of the employer—so any newspaper, magazine, publisher, or other media company (but not, say, the Authors Guild’s Bulletin or Amtrak’s magazine)—will not satisfy prong B, and as a result they will have the rights accorded to employees under section 7 of the NLRA, even though they usually meet prongs A and C. In other words, these writers would have collective bargaining if the PRO Act passes the Senate and is enacted into law!

What Are the Benefits for Writers? Are There Any?

The PRO Act would give writers who work under independent contractor agreements the opportunity to form unions and negotiate terms around fair compensation, copyright, and benefits, assuming that the publications they write for are part of the usual business of the employer (or their relationship with the publications satisfies either prong A or C).

Why Does the Authors Guild Support Collective Bargaining for Authors and Freelance Journalists?

Authors and freelance journalists who are primarily independent contractors have little or no bargaining power to negotiate terms with publications. They are given standard form contracts to sign that demand an ever-growing list of their rights in their works on low payment terms. State and federal labor laws, as well as antitrust law, prevent them from acting collectively to reject terms, demand better pay, or boycott bad actors.

The law currently has only two types of workers: employees (or W-2) workers, who relinquish copyright in their work to their employers, and independent contractors (1099 workers), who are treated as competing businesses rather than workers. Antitrust law prevents the latter from organizing for any purpose to negotiate terms with their buyers or even discussing financial terms with each other without violating antitrust restrictions on price fixing.

Yet creative workers are in many ways more akin to employees than they are to independent businesses capable of market competition, in that these workers have almost no bargaining power. Terms are set by the industry on a take-it-or-leave-it basis, with the ability for even best-sellers and highly valued creators to negotiate only around the edges. As advocates of authors for over a century, the Authors Guild has a first-hand view of the worsening in book, news, and magazine media as well as digital publishing contract terms and the diminishing power of authors to negotiate changes.

With midlist author incomes plummeting due to numerous factors, but largely as a result of pressures on the publishing market from major internet-based platforms, writers need the ability to push back against publishers collectively. The same can be said for creative professionals in virtually every other field where it is becoming increasingly difficult to earn a sustainable living for anyone other than those at the very top. Collective bargaining rights would allow writers and other creative professionals to leverage their collective association in negotiations with the powerful companies they work for, secure their rights in their intellectual property, set minimum compensation standards, share information about financial terms, and boycott bad actors. Collective bargaining rights for independent contractors can be achieved either by amending the NLRA as the PRO Act does, or, alternatively, by creating an exemption to the antitrust laws—a bill that the Authors Guild has drafted and is poised to have introduced.

JOIN THE AUTHORS GUILD IN SUPPORTING THE PRO ACT!
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