Backgrounder

Worker Flexibility and Small Business Protection Act

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Democrat bill, gig economy, Independent Contractor, Joint Employer

Worker Flexibility and Small Business Protection Act

Bill name: Worker Flexibility and Small Business Protection Act
Bill sponsor: S. 4738, Sen. Patty Murray (D-WA), Sen. Sherrod Brown (D-OH)
                            H.R. 8375, Rep. Rosa DeLauro (D-CT)

Summary

Congressional Democrats introduced the Worker Flexibility and Small Business Protection Act to severely restrict work opportunities for independent contractors― a direct response to the Trump Administration’s proposed rule to clarify the definition of “independent contractor” and protect an individual’s ability to seek independent work. The bill goes further to reimplement and expand the Obama-era “joint employer” rules and would institute a public “Consumer Right to Know” rating system designed to shame employers. Under this system, businesses would be required to display a sigh with “an emoji face or cartoon face” signifying the company’s status – anywhere from “excellent” (“very open-mouthed smiling face and a deep-green background color”) to “needs improvement” (“frowning sad face and a gray back ground color”).

Background

Under the Worker Flexibility and Small Business Protection Act, all those formerly-independent contractors would become “employees” within a company’s wage and benefits structure and thus become new targets for union organizing. No professions would be exempted like in California under its much-maligned AB5 law.  Anyone performing services for pay would be automatically presumed to be an employee. This presumption may only be overcome by “clear and convincing” evidence. Wrongly classifying an employee as a contractor would result in a $10,000 fine for the first violation, then a $30,000 fine if repeated or willful, as well as 1 percent of net profits. These fines could not be covered by liability insurance.

If passed, all protections in this bill “shall be interpreted expansively in favor of the employee or individual claiming classification as an employee.”  Exemptions and exclusions available for employers “shall be interpreted narrowly against the employer…”. 

Scheduling Issues

For those former independent workers, the bill creates a “Right to Keep Flexibility” to continue for the remainder of their employment the scheduling flexibility they had enjoyed for the 12 months preceding enactment of this legislation. All workers would have the ability to request additional schedule flexibility. Employers must respond to every shift request and can only deny a request for “a compelling business necessity” and must justify the reason in writing. Employees can appeal any denial to the Department of Labor and DOL can overrule the employer.

Independent Contracting and the Gig Economy

As seen in other labor legislation introduced or supported by the bill’s author, such as the PRO Act, the Worker Flexibility and Small Business Protection Act would block individuals from performing independent work and upend the burgeoning “gig economy” by imposing an “ABC-Plus” test to reclassify independent contractors as employees.  This action would mimic California’s  state law to restrict work as an independent contractor, but without applying the dozens and dozens of exemptions to AB5 that California’s legislature has created for independent contractors working as, for example, travel agents, musicians, or even manufactured housing salespersons.

The bill exempts certain gig economy workers such as those in the transportation or delivery services from minimum wage and overtime rules if their employer has agreed to a collective bargaining agreement. Workers that feel they have been misclassified can file class action lawsuits on behalf of themselves and others for 25 percent of civil penalties if DOL does not take action within 60 days of a complaint being filed.

In contrast, on September 22, 2020, the Trump Administration announced a new independent contractor rule designed to protect opportunities for individuals to pursue independent work at their freedom, convenience, and flexibility.

The rule supports a recent survey by the Coalition for Workforce Innovation found that 94 percent of independent contractors were “satisfied with their current work arrangement.”

Return of the Joint Employer Standard

The Worker Flexibility and Small Business Protection Act would also reimpose and expand the Obama Administration’s joint employer standard, meaning that multiple businesses can be determined to jointly employ workers – such as a contractor and subcontractor, franchisor and franchisee, or a business and a staffing company.  A joint employer would share responsibility for purposes of a worker’s rights and protections, including collective bargaining which would then be required of all entities ruled as a joint employer of workers in a bargaining unit.  Employers will be responsible for all “corporate family employees,” vastly expanding liability to all subsidiary employees.  A civil penalty can be levied against owners, directors, officers, and managing agents if they are involved in the violation or do nothing to stop it.  Finally, the top 10 shareholders will be jointly and severally liable for all violations and would be required to pay 10 percent of civil penalties, restitution, and other fees against the employer.

New DOL Requirements for Employers

According to the summary of the bill, employers would need to create a “supply chain responsibility plan that details how the employer will attempt to ensure that its supply chain does not include employers that regularly violate workers’ rights (across all labor laws, including foreign countries’ national labor laws.)” The employer would need to submit the plan to DOL yearly with a civil penalty for violations of $50,000 per month.

The use of temporary workers, under this bill, would also be subject to new rules.  All temporary workers would be guaranteed pay equal to direct employees and, upon working 1,040 hours (equivalent to 40 hours a week for 26 weeks) in a twelve-month period, be automatically converted into a direct employee.  It would also prohibit the use of temporary workers during a labor dispute.  Temporary staffing companies would be required to register with the U.S. Department of Labor which would then publish a list of the registered companies as well as those that may have their registration suspended or revoked.

The Department of Labor would also be required to create a public “Workers’ Rights Compliance Rating” of all employers, rating their compliance of federal labor laws, for the purpose of “Consumer Right to Know.”  Each business would be required to post a public notice of their rating, in the form of a written summary and “an emoji face or cartoon face that reflects the summary.”

Bill Status:  The Worker Flexibility and Small Business Protection Act was introduced in the Senate and House on September 24, 2020. It has been referred to the Senate Committee on Health, Education, Labor, and Pensions and the House Committees on Education and Labor, Oversight and Reform, Administration, and Ways and Means.

 

Click here to download the backgrounder. 

Also related: Helping Gig Economy Workers Act

Also related:  Protecting the Right to Organize Act

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ADDITIONAL RESOURCES


PRESS RELEASE:  Murray, Brown, DeLauro Introduce Landmark Bill Expanding Labor Laws to Protect Workers

September 24, 2020
U.S. Senate Committee on Health, Education, Labor and Pensions
https://www.help.senate.gov/ranking/newsroom/press/-murray-brown-delauro-introduce-landmark-bill-expanding-labor-laws-to-protect-workers-

 

BILL SUMMARY: Worker Flexibility and Small Business Protection Act
Help.Senate.gov
https://www.help.senate.gov/imo/media/doc/Summary%20%20Section-by-Section%20-%20Worker%20Flexibility%20and%20Small%20Business%20Protection%20Act%20-%20FINAL.pdf

 

BLOG: Democrats Introduce Bill to Take Down Independent Contractors
September 29, 2020
Independent Women’s Forum, Charlotte Whelan
https://www.iwf.org/2020/09/29/democrats-introduce-bill-to-take-down-independent-contractors/ 

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