What Is the PRO Act, and How Will It Affect Small Businesses?

In early February 2021, members of Congress introduced the “Protecting the Right to Organize” Act, otherwise known as the PRO Act. This act attempts to restore fairness to the economy by strengthening the federal laws that protect workers’ right to join a union. While protecting organized labor, the PRO Act may inadvertently impact small business owners.

What Small Business Owners Should Know

The majority of the PRO Act is designed to address labor unions, to provide guidelines for protecting employees’ right to organize, and to classify more independent contractors and freelancers as direct employees.

The bill would also implement the Obama administration’s “joint employer” standard. This means that franchisors (national firms) can be held responsible for any actions taken by a small business that uses their brand. Because the PRO Act is focused on unionizing franchises, it could also prevent national brands from partnering with a small business like yours.

How Are Independent Contractors Affected?

The proposed legislation from the PRO Act “aims to reduce the use of the independent contractor classification for workers.” If you’re a small business owner who relies on freelancers and independent contractors regularly, this legislation is detrimental as it classifies more workers as direct employees, incurring more expenses for your small business. This would be implemented with a three-part “ABC test.”

What Are the Key Proposals of the PRO Act?

  1. The PRO Act would impose financial penalties on any companies that violate workers’ rights. One example of a violation of workers’ rights is wrongful termination, like termination for attempting to unionize.
  2. If a business’s corporate directors and officers know of violations and fail to take action to protect an employee, The Act will add a personal financial liability fee.
  3. The process creates an automatic ruling that reinstates an employee or employees while a case is pending with the National Labor Relations Board (NLRB).
  4. Worker’s Collective Bargaining rights would be expanded by allowing unions to collect a fair share of fees that cover the costs of any collective bargaining. Essentially, if there are employees of a business who haven’t joined the union, they will contribute fair share fees if the business’s unionized employees are participating in collective bargaining.
  5. Workers can support strikes, boycotts, and any other acts of unity that are occurring by workers at other companies.
  6. Workers cannot be denied solutions on the basis of their immigration status.

In essence, the PRO Act can have a big impact on small businesses, especially when it comes to joint employer standards, independent contractors, and the proposed amendments.
At Elevated CPA, we’re large enough to meet all your needs—and small enough to know your name when you call. It’s why we specialize in accounting for small businesses! Schedule a 15-minute introductory call with us so we can get to know you and your financial goals.

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