United States: The PRO Act's Potential Effect On Employers

On Tuesday, March 9, 2021, the House of Representatives passed the Protecting the Right to Organize (PRO) Act.¹ With the PRO Act, House and Senate Democrats seek to amend the National Labor Relations Act. Here, we outline a few key aspects of the legislation. If the PRO Act succeeds in the Senate, it will be the most significant change to United States labor law in decades. If the Act passes in the Senate—a fate far from certain—it will impact both unionized and non-unionized workplaces.

Eliminating State Right-to-Work Laws

A key provision of the PRO Act would override state “right-to-work” laws, a reversal of one of the key features of the 1947 Taft-Hartley amendments to federal labor law. Twenty-seven states, including Arizona, Idaho, Nevada, Texas, and Utah, have right-to-work laws, which prohibit unions from negotiating contracts with employers that would require employees to pay union dues to maintain employment. Union advocates disfavor right-to-work laws because they create a free-rider problem, where employees who receive the benefits of union representation don't have to financially contribute to the union. The PRO Act specifies that any provisions in a collective bargaining agreement (union contract) that “all employees in a bargaining unit shall contribute fees to a labor organization for the cost of representation, collective bargaining, contract enforcement, and related expenditures as a condition of employment shall be valid and enforceable notwithstanding any State or Territorial law.” Eliminating these state right-to-work laws is one of the ways in which the PRO Act aims to strengthen and support collective bargaining.

Restricting Employer Influence on Unionization

Another way in which the PRO Act would revise federal labor laws is increased regulation of employer communication with employees during the unionization process. The PRO Act would prohibit employers from forcing employees to attend meetings, often called “captive audience” speeches, regarding management's views on unionization. Additionally, employers would have to report payments that they make for labor law counseling during the election process. By contrast, the Act makes it easier for unions to communicate with potential members, requiring employers to share employees' personal contact information (including home address, home phone number, personal cell phone number, and personal email address) with union organizers in the weeks before an election.

Banning Mandatory Arbitration Agreements

The PRO Act would reverse the Supreme Court's decision in Epic Systems Corporation v. Lewis, when the Court confirmed that class action waivers in employment arbitration agreements do not violate the National Labor Relations Act. The PRO Act's proponents seek to undo the Epic Systems decision, ensuring that workers are able to bring claims in court to vindicate employment-related rights. Employers have concerns about this move, because it is likely to increase the number of class action lawsuits, which are expensive and time consuming for employers and employees alike.

Changing the Independent Contractor Test

In addition to eliminating right-to-work laws, the PRO Act changes the legal test for who is an independent contractor, allowing more workers to be classified as employees and participate in the collective bargaining process. The Act borrows the California “ABC test,” which does not allow employers to classify workers as independent contractors 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.”²

Under the Act, it would be more difficult for employers to establish independent contractor relationships. Businesses across the country would have to consider whether to revise their independent contractor arrangements to meet the more stringent test, or if they should instead classify more workers as employees.

Likelihood of the PRO Act Becoming Law

The future of the PRO Act is uncertain. The Act has passed the House, but it still has to clear the Senate and receive President Biden's signature to become law. President Biden supports the Act. Not all Senate Democrats mirror his support for the PRO Act. Thus, with a narrow Democratic majority and the hurdle of a Republican filibuster looming in the Senate, the PRO Act may not become law, or may undergo significant changes before it does. Nevertheless, with a piece of legislation as significant as this one, employers would be wise to understand its effects in advance of passage. Because the PRO Act is far-reaching, this article discusses only a few of its provisions. Employers with questions or concerns about the effects of the PRO Act should consult with legal counsel for a fuller understanding of its potential impact on their organization.

Footnotes

1 The Act is available at  https://www.congress.gov/bill/117th-congress/house-bill/842 .

2 AB 5, the California bill that is the basis for the ABC test in the PRO Act, is available at  https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB5 .

Originally published 15 March 2021

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