By a mostly party-line vote of 225–206, the House of Representatives on March 9, 2021 passed the Protecting the Right to Organize Act of 2021 (PRO Act). The bill is one of the most consequential pieces of labor legislation to have advanced in decades. If enacted, it would make fundamental changes to the National Labor Relations Act (NLRA) and key provisions of the Labor-Management Reporting and Disclosure Act of 1959 (29 U.S.C. § 401 et seq.).
- Supervisory status: Revises definition of “supervisor” under the NLRA by eliminating authority to “assign” work and “responsibly direct employees” as indicia of supervisory status. Also provides that employees must be performing supervisory duties for a majority of their worktime to meet the statutory definition.
- Joint-employer status: Restores the joint-employer test set forth in the National Labor Relations Board’s (NLRB) Browning-Ferris decision. This would make it more likely that employers will be liable as “joint employers” of individuals employed by the “primary employer” (ex. contractor; temporary employment agency).
- Employees/independent contractors: Adopts the “ABC” test, which presumptively classifies individuals as “employees” unless: (A) they are free from control and direction in the performance of their duties; (B) they perform services outside the employer’s usual course of the business; and (C) they customarily engage in an independently established occupation providing services similar to those performed for the putative employer.
- Representation elections: Reinstates NLRB decision in Specialty Healthcare permitting smaller bargaining units, allows for expedited representation elections, and authorizes unions to decide if elections will be in-person or by mail ballot.
- Class-action waivers in arbitration agreements: Prohibits class-action waivers in arbitration agreements, thereby overturning the Supreme Court’s Epic Systems ruling.
- Binding-interest arbitration: Requires binding arbitration of all issues not resolved in negotiations for initial agreements.
- Work stoppages: Prohibits permanent strike replacements; protects employees engaged in intermittent strikes and work stoppages.
- Preempts state “right to work” laws: Authorizes contract provisions requiring payment of fees covering the cost of union representation, contract negotiation and administration, and related matters.
- Penalties/damages/civil liability: Adds provisions for monetary penalties and damages (attorney fees; liquidated/punitive damages); imposes personal liability on corporate directors/officers; allows unfair-labor-practice claims to be filed in federal court.
Analysis and Impact
The proposed legislation will have a significant impact on labor/management relations. Provisions likely to impact a wide array of employers include changes to supervisory status; joint employer liability; independent-contractor classification; binding-interest arbitration; and damages/penalties/civil liability.
The question of whether an employee meets the statutory definition of “supervisor” is one of the most litigated issues in union-representation cases. There are presently 12 criteria set forth in the NLRA for determining whether an employee is a supervisor and therefore ineligible for union representation. An employee possessing the authority to engage in any one of the 12 criteria meets the definition of “supervisor.” Eliminating two of these statutory criteria—“assign” and “responsibly to direct”—will remove commonly relied-upon employer defenses against union representation.
With these changes, it is likely that some portion of an employer’s supervisory (and possibly managerial) workforce will become eligible for union representation. This may require employers to negotiate and administer additional collective-bargaining agreements, and create added pressure to increase wages and benefits for covered employees.
As noted above, the NLRB’s Browning-Ferris decision extended joint-employer status to employers exercising “direct and indirect control” and “reserved authority.” The NLRB overturned Browning-Ferris in a regulation providing that joint-employer status requires the exercise of substantial direct and immediate control over essential matters such as discipline, hiring, or firing.
Reinstating Browning-Ferris will make it more likely that employers are found to be “joint employers” of individuals employed by a “primary employer” such as a contractor or temporary-employment agency. Were this to occur, employers would face an increased likelihood of being held legally responsible for the unfair labor practices committed by companies with whom they contract to provide services or engage temporary workers.
The legislation adopts the ABC test for determining independent-contractor status. Under this test, individuals are presumptively classified as employees unless each of the following conditions is met: (A) The individual is free from control and direction in the performance of their duties; (B) the individual performs services outside the employer’s usual course of the business; and (C) the individual customarily engages in an independently established occupation providing services similar to those performed for the putative employer.
The ABC test is more stringent than either the “economic-reality” or “common-law” tests adopted by the courts and federal regulatory agencies. In this regard, under both the economic-reality and common-law tests, no single factor necessarily disqualifies a worker from independent-contractor status. By contrast, each ABC factor may individually disqualify a worker from independent-contractor status. Adopting the ABC test will likely result in more individuals becoming eligible for union representation within the workforce.
Binding-interest arbitration allows an outside arbitrator (or arbitration panel) to decide the terms of a collective-bargaining agreement (e.g., wages; benefits; work schedules; conditions of employment). This is a significant departure from the existing process for resolving bargaining issues used throughout the 85-year history of the NLRA. Requiring binding-interest arbitration for initial contracts will likely impact the tenor, outcomes, and fiscal implications of the bargaining process.
The proposed legislation authorizes the NLRB to impose damages awards (backpay, front pay, consequential damages, and liquidated damages) in cases where the employer is found to have committed a serious unfair labor practice. It also allows the NLRB to impose monetary penalties against employers of up to $50,000 for each unfair-labor-practice finding, and up to $100,000 for each serious unfair labor practice in which the employer has committed another such violation within the preceding five years.
The legislation also allows any person injured by an employer’s unfair labor practice to bring a civil action in federal court to recover the aforesaid damages as well as punitive damages and attorney fees. The legislation separately imposes penalties on corporate directors and officers who “had established a policy that led to such a violation, or had actual or constructive knowledge of and the authority to prevent the violation and failed to prevent the violation.”
These changes create the potential for an increase in monetary liability, litigation expenditures, and insurance premiums for coverage related to claims and defense costs.
The PRO Act may be the most significant piece of labor legislation to come forward in the past 75 years. While it remains unclear whether the bill will receive enough votes to reach the Senate floor, the timing is certainly favorable given the Democratic control of Senate and the President Biden’s open support for the bill’s passage. Even if the bill does not pass, it is possible that discrete portions of it may be included as add-ons to other legislation, or that specific provisions will be adopted through the federal rulemaking process or by executive order.
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