The PRO Act does not have the votes to pass Congress, Sen. Mike Braun, R-Ind., said this morning, but that does not mean President Joe Biden won't find ways to advance the labor initiatives it contains.
The Senate Committee on Health, Education, Labor and Pensions held a hearing on the PRO Act, which is opposed by the financial services industry. Among its many provisions, the legislation would change the definition of “independent contractor” in federal labor law, potentially affecting the status of insurance and financial professionals.
Braun, 67, serving as ranking member for the hearing, ran a highly successful business manufacturing truck bodies and accessories before being elected to Congress in 2014. The PRO Act might end up as regulation instead of law, he said.
"Chances are this is not going to pass because not all Democrats are for it," he said. "But then the next thing that will happen is you'll get an executive order."
Democrats revealed last week that they would include the PRO Act in their $3.5 trillion partisan package, which they plan to pass using reconciliation, which requires only a simple majority. But only certain spending-related provisions, like enabling the NLRB to levy civil penalties on violating employers, are actually eligible for passage via reconciliation, Politico reported.
That could leave Biden, a self-described union man, to try to push through other labor initiatives via executive order. Which initiatives the administration would prioritize is unknown, but Biden's secretary of labor is Marty Walsh, a 30-year union member and official.
'Worst Bill In Congress'
The National Retail Federation has called the PRO Act "the worst bill in Congress." Passions are high on both sides on what the bill would mean, with Republicans on the panel claiming it would punish small businesses, while left-leaning members saying it would increase wages and give workers more fair representation.
Here are five provisions in the PRO Act:
1. It would permit unions to override so-called "right-to-work" laws in more than two dozen states. Those laws allow workers in union-represented workplaces to opt out of the union, and not pay union dues. At the same time, such workers are still covered under the wage and benefits provisions of the union contract. Those dues could be collected under the PRO Act.
2. It would bar employer interference and influence in union elections. Companies would not be permitted to host mandatory meetings to lobby against union organizing. Also, ballots could be cast at a location away from company property.
3. It would allow newly certified unions to seek arbitration and mediation to settle such impasses in negotiations. Sen. Tim Kaine, D-Va., noted that even when unions are formed via a successful vote, companies often delay recognizing and negotiating with the new union for months or even years.
4. It would prevent an employer from using its employee's immigration status against them when determining the terms of their employment.
5. Companies and executives that violate workers' rights would face penalties outlined in the bill. Corporate directors and other officers of the company could also be held liable.
The ABC Test
But it is the so-called "ABC Test" that has the attention of the financial services industry. The PRO Act, via the ABC Test, could classify many insurance agents, insurance brokers and financial advisors as employees, rather than as independent contractors.
The test requires workers classified as independent contractors to be “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;" perform service “outside the usual course of the business of the employer;" and be “customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed."
This reclassification would have deleterious effects for the financial services industry, say a group of 16 industry trade associations, who are lobbying furiously against the bill and sent a letter to the Senate HELP committee.
“By effectively reclassifying independent contractors as employees, the PRO Act would create unintended consequences for the industry, and specifically insurance producers and independent financial advisors," the letter reads. "In times of catastrophe, insurers engage independent contractors to provide a faster response for consumers experiencing loss."
Trade associations have spent months lobbying Congress to give financial services an exemption from the PRO Act employee classification.
The compensation of insurance and financial professionals is carefully recorded and reported on IRS Form 1099, officials note, and concerns over cash payments and unreported income do not apply to the insurance and financial services industry.
Many insurance and financial advisors have relationships with multiple insurance companies, broker-dealers, or registered investment advisors, giving them diverse lines of products and services to offer consumers.
They are small business owners who have contractual agreements with these companies. Affiliated insurance and financial advisors are also properly classified as “independent contractors” under current law and long-standing precedence.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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