Backgrounder

Five Pro-worker Policies and Proposals that can Jumpstart the American Economy Amidst COVID-19

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gig economy, Independent Contractor, Paid time off, Raise Act, right-to-work

The economy is reeling, workers and job creators are hurting, and some in Congress are proposing trillions in spending in response to the COVID-19 economic downturn. However, there are simple pro-worker policies that can eliminate unnecessary barriers to entrepreneurship, increase employment, and raise wages without increasing the debt or putting mandates on job creators.

All five of the pro-worker policies below, most of which are already in bill form, would go a long way in aiding workers during this unprecedented economic time that requires flexibility and innovation in the workplace.

  1. Allow Businesses to Assist Independent Contractors
    Currently, if a business provides financial assistance or other benefits to a contractor, the exchange could be considered employment compensation, which puts the contractor at risk of falling into the legal category of employee— triggering a whole different set of responsibilities and regulations.
  1. Allow Unionized Employees to Receive Raises and Bonuses
    Currently, many collective bargaining agreements guarantee a floor for wages, but also prevent workers from exceeding a maximum wage, creating a ceiling. Provisions in some union contracts specify the amount an employee can be paid and do not allow employers to give individual employees raises or bonuses that conflict with the agreement.
  • Enacting the Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act (introduced by Sen. Sen. Rubio, Marco [R-FL] and Rep. Dusty Johnson [R-SD]) would remove the wage ceiling of many collective bargaining agreements and give employers the autonomy to reward high performing union employees as they see fit.
  • The RAISE Act would also put employees who are unionized on the same playing field as non-unionized employees who can receive higher compensation on an individual basis from their employers. Companies such as Dollar General, Lowes, Target, and Walmart, are all giving bonuses and increasing compensation to their employees amidst this economic crisis. Kroger, a unionized grocery chain, is also able to give its frontline workers a raise― although the raises are applied mostly across the board to all employees, not just high performing ones. Unionized companies such as Kroger are limited to the wage scales dictated in their union contracts, meaning the other non-union companies can give individual rewards for hard work and merit but union companies are restricted. The RAISE Act would allow unionized employers to go further and reward individual employees who deserve special recognition.
  1. Allow Gig Economy Workers to Be Classified as Independent Contractors
    Gig economy workers have become a growing part of the American workforce in the last decade. They’ve also been hit particularly hard during the COVID-19 crisis. A change in tax and labor law could provide some much-needed relief.
  • In a letter to House and Senate leadership, Republican Study Committee (RSC) Chairman Mike Johnson (R-LA) and RSC American Worker Task Force Chairman Andy Barr (R-KY) echoed the need to protect gig workers: “Many gig economy workers are struggling to make ends meet.” They added, “Congress should reduce barriers that hinder them from making a living.”
  • The New Economy Works to Guarantee Independence and Growth Act of 2019 or the NEW GIG Act (sponsored by Sen. John Thune [R-SD] and Rep. Tom Rice [R-SC]) would make it easier for workers to be classified as independent contractors under tax law― providing them with more freedom and flexibility―as long as they meet a three-part test.
  • The three part test includes the following: (1) the worker does not work exclusively for a single recipient (2) the provider has a principal place of business and does not work primarily at the recipient’s place of business; and (3) the performance of the services under a written contract must specify that the worker is not an employee, the recipient will satisfy withholding and reporting requirements, and that the worker is responsible for taxes on compensation.
  • The New Gig Act is limited to changing the language in tax lax and needs to be extended to the Fair Labor Standards Act to have a full effect, but it’s a good start.
  1. Allow Employees and Employers the Choice of Overtime or Paid Time Off
    Currently, employers are required to pay employees overtime at 1.5 times the employee’s regular rate of pay for employees making under $684 a week, or $35,568 per year. This leaves few options for employees in this pay bracket who might prefer comp time to the extra money.
  • The Working Families Flexibility Act of 2019 (introduced by Sen. Mike Lee [R-UT] and Rep. Martha Roby [R-AL]) would allow an employer to offer its employee a choice of paid time off instead of overtime if the employee works more than 40 hours a week. During this time of COVID-19, some employees may prefer the time off to be available to handle family issues at home. It would be voluntary for both the employee and employer to participate.
  • Additionally, some experts say this pro-worker policy would go a long way toward increasing paid leave for lower-wage workers. These types of arrangements are already available to many public employees and private sector employees earning above the overtime threshold.
  1. Allow Unionized Employees the Freedom to Choose

Currently, in 23 states, private sector employees can be fired if they refuse to pay union dues. They do not have the choice to refuse payment, even if they disagree with how their funds are being spent.

  • The National Right to Work Act (sponsored by Sen. Paul, Rand [R-KY] and Rep. Joe Wilson [R-SC]) would protect the right of private sector employees across the country to choose whether paying union dues is a good investment, or if they want (or need) to keep their entire paycheck.

* These pro-worker policies and recommendations were originally proposed in an article in The Hill (“Put entrepreneurs, workers and flexibility in next stimulus package) by F. Vincent Vernuccio, president of Institute for the American Worker and a senior fellow at the Mackinac Center.

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