March 10, 2021 - UPDATE: The PRO Act passed the U.S. House of Representatives and will make its way to the Senate. The act previously failed in the Senate, and this is the most likely time we could see amendments to remove the freelance-career-killing ABC test.
Remember, this is the first step in codifying the ABC test in federal law. The Biden administration has made it clear this is a three-prong process, working the antiquated ABC test into all federal labor, employment and tax law.
Adoption of the ABC test could force freelancers to become employees against their will which could eliminate business expense deductions, the ability to choose when and where you work, the ability to reject individual projects, and the ability to set your own rates and other contract terms.
Contact your senators today and ask them to adopt amendments to replace the ABC test with the more modern IRS rules that protect both misclassified employees and legitimate freelance professionals.
If you're active in freelance networks on social media, chances are good you've heard about the PRO Act recently. More specifically, you've probably heard that it's bad for freelance professionals like you. But do you understand what's at stake? And, more important, do you know what you can do about it?
Let's take a look at what the PRO Act is, what it intends to do, how it might hurt freelancers, and what we can all do about it.
What is the PRO Act?
The PRO Act, or the Protecting the Right to Organize Act, is largely about union organizing and better protections for employees.
If you're familiar with stories like those about Amazon warehouse workers pushing to unionize, you'll know why this is important for U.S. workers. Employees should have the option to unionize without threats and other adverse actions from their employers.
House Majority Leader, Steny Hoyer, announced on Twitter that the House would consider the PRO Act during the week of March 8th.
I just announced at my weekly press conference that the House will consider the PRO Act the week of March 8, legislation that affirms workers’ right to organize and bargain collectively for better pay and benefits. I look forward to it passing with bipartisan support.
— Steny (Wear a Mask) Hoyer (@LeaderHoyer) February 24, 2021
While the declared aim of the act is to protect workers, it also poses potential problems -- such as employees being forced to pay union dues whether or not they want to join, and the required disclosure from employers of employees' personal information in the form of union voter lists. We'll touch back on this a bit later to explain why it should matter to you as a freelancer, but for now just know these concerns exist despite the good intentions.
Pitting Union Workers Against Independent Contractors
Personally, I'm pro-union. I have family members who rely on their unions, and I support them fully. Even so, while largely supportive of the act, I have concerns about the PRO Act that go beyond the scope of its affect on freelancers.
But the big issue here is the way the PRO Act, in its current form, essentially pits union workers against freelancers-by-choice. How did that happen?
"Gig Economy" Protections vs Freelance Professionals
While terms like "gig economy" and "gig workers" used to be accurate representations of freelance workers, that hasn't been true in years. Instead, those terms have largely been co-opted to exclude freelancers who operate a business and choose to be self-employed.
"Gig workers" is now a term used more often to mean things like Uber drivers or those who take generally-low-paying piecemeal work on "freelance" platforms (which is a topic all its own for another day). The reality is many of these workers could be more accurately described as "misclassified employees."
That's something the PRO Act aims to change in an effort to get those workers benefits and other typical employee protections. How does it try to address misclassification? The ABC Test.
What is the ABC Test?
The ABC Test, similar to the recent AB5 test in California that cost many freelancers their livelihoods and drove others out-of-state, is a three-point test to determine if a worker is an employee or independent contractor.
Basically, you start out with an assumption of employee status for any service provider. To be classified as an independent contractor / freelancer, you would need to pass the following three tests:
- A - "the individual is 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;"
- B - "the service is performed outside the usual course of the business of the employer;"
- C - "the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed."
Remember, you don't just need to pass one of those tests. You need to pass all three to retain your status as an independent contractor.
Oh, and changing your business form probably won't help you here. As long as you're an independent service provider, there don't appear to be any exceptions currently for LLCs or other business formats.
How the ABC Test Could Hurt Your Freelance Writing Business
The main issue with the ABC test as it applies to freelance writers is test B.
You would no longer be able to freelance for anyone where your freelance work is within the normal course of the client's business.
Let's look at some examples:
- If you're a freelance copywriter and you take on a project for a major non-publishing client (let's say PepsiCo) for a campaign here or there, you're probably fine.
- However, if you were to freelance for a marketing firm on behalf of PepsiCo (their client in this case), you might fail the test as copywriting would be a key part of any marketing firm's business activities.
What about freelance bloggers?
- Let's say you do freelance blogging for a local retailer. You're probably OK because blogging is promotional for them, not their core business.
- But if you took on freelance blogging for a large publication-style blog, where the blog itself is the core business, you'd fail this test and probably have to become an employee.
Let's not forget about freelance magazine writers.
Magazines are inherently built around providing content. So writing for any of them as a freelancer would likely fail the second test. Publications would have to hire writers as employees, meaning we'd almost certainly see fewer voices covering more articles simply because there isn't enough work to go around on an all-employee basis.
This could also lead to more articles from non-expert writers as it would become cost-prohibitive for publications to hire subject matter experts as employees on a per-article basis. Not exactly what anyone should want when the media already struggle so much with misinformation.
From One Type of Misclassification to Another
What we could end up with if the PRO Act's ABC Test isn't amended is trading misclassified employees for misclassified freelancers.
Rather than seeing companies exploit employees by calling them independent contractors (so workers don't get benefits, paid time off, and are responsible for more of the tax obligation), we risk seeing employers afraid to hire legitimate freelance service providers.
We saw this in California with AB5. Even after amendments and the addition of over 100 exceptions, this test (ultimately the same as the ABC test) left clients in the state unwilling to hire California freelancers.
I still often see "no California writers" terms in freelance writing job ads when I curate listings. That's because clients are still afraid of getting hit with hefty fines if they break these over-complicated rules.
Rather than seeing the dramatic increase in union jobs hoped for, the state saw many freelancers lose gigs and income.
This set of tests cost freelance writers their businesses. And now legislators want to do the same nationally.
What Freelancers Could Lose if Misclassified as Employees
So, what could actually happen to you as a freelance writer if the ABC Test isn't removed from the PRO Act? Well, start with those earlier concerns I mentioned that would face some employees, because you'd now potentially be classified as one:
- You could be required to pay union dues even if you don't want to join a union. And I'm not even sure how that would work if each client became a part-time employer, with the potential for multiple union involvement.
- You'd be subject to having clients -- now employers -- give your personal contact information over to union leaders (with or without your consent) in voter lists.
That's enough to be a concern. But it gets far worse.
Think about all the things you love most about being a freelance writer -- the freedom, the flexibility. Fail the ABC Test, and that could be gone.
Poof! You could lose:
- Your ability to set your own hours and work days
- The ability to set your own rates from one project to the next
- The copyright to your work (as an employee, that would belong to your employers by default)
- The ability to choose your own work tools & communication methods
- Your ability to work wherever you want (home, café, library, or even on the road as a digital nomad)
- The ability to reject projects you don't want to take on
- Your ability to take breaks whenever, and as often as, you want (such as to care for family or run errands)
- The ability to determine your own vacation time or other extended breaks
- Deductible business expenses
We'd lose pretty much every benefit that makes freelancing appealing in the first place. And these still aren't the only ways freelance professionals could be affected.
Failing the ABC test and being classified as an employee would also mean:
- You would have to pay into unemployment insurance for your various part-time jobs through each "client."
- But, at the same time, you would have a difficult-to-impossible time claiming unemployment benefits if you lost a "client" because you would still have income coming in from others.
And the ABC test would affect some groups more than others. For example:
- It could prevent disabled workers from freelancing on their own terms when they might not be able to work in a traditional environment or schedule.
- The ABC test would impact many stay-at-home parents who freelance from home to take care of children, either out of preference or need due to high costs of childcare.
- This test could prevent students or those in low-paying full-time jobs from having freelance work as a viable and flexible part-time option.
- The ABC test would re-classify freelancers who earn more as independent contractors than they would in many traditional employment environments (including many women, older freelancers, and minority freelancers who tend to face more workplace discrimination).
So what we have is a test that would disproportionately impact already-marginalized communities while stripping most of the advantages of self-employment away from freelance service providers. And this re-classification test is being heavily supported by Democrats in Congress who otherwise claim to want to, and work to, help these groups.
Now look, even in a worst-case scenario, these changes probably wouldn't affect me much between my international freelance clients and the fact that I've long diversified my income streams (through things like e-books sales and online publishing revenue).
But you don't have to be directly affected by this to be damn angry about how it would hurt your colleagues, especially those most relying on their freelance income and the freedoms freelancing affords them. So if you won't speak out for yourself, I hope you will for them.
What You Can Do as a Freelance Writer
If you don't want the ABC Test to potentially put you out of business and force you into an employee role, there are some things you can do right now. But first, it's important to know fighting the ABC Test doesn't have to mean rejecting the entire PRO Act. It can better serve both union workers and the self-employed by choice.
An Alternative to the ABC Test
The ABC Test was developed back in the 1930s. It was developed more along the lines of protecting factory workers, not freelance writers. The test is not designed, nor equipped, to deal with modern-day self-employment and the growing remote work revolution.
Fortunately, we already have an alternative test available on the federal level -- the IRS classification test for independent contractors. This is a more modern approach that addresses the differences between legitimate self-employed service providers and workers being exploited and misclassified by employers.
We've talked about elements of the IRS guidelines here over the years and how some companies, including supposed middlemen like freelance marketplaces, sometimes cross those lines. But as a quick reminder, the IRS rules fall under three areas:
- Type of relationship
These rules cover issues such as how much control the hiring party exerts over the worker (can they tell you where and when to work?). It factors in how workers are paid (do you get reimbursed for business expenses?). And it looks at things like contracts and whether or not benefits are provided.
Whether or not the work freelancers do is "a key aspect of the business" is already a factor in these rules. It's just not a hard line by itself. It takes the rest of the working relationship into consideration, which protects your right to choose self-employment as a service provider.
The problem isn't that we don't have federal employee misclassification rules. It's that the existing rules -- the more appropriate, modern rules -- aren't being adequately enforced.
Contact Your Representatives
This isn't the first time the PRO Act has come before the House. It passed the House during the last Congress only to fail in the Senate.
And even if you want the act to ultimately succeed, there's still time to contact your representatives in Congress and ask them to replace the ABC Test with the IRS classification rules for independent contractors.
This protects workers looking to join and form unions while also protecting those of us who choose to remain self-employed freelance professionals.
But doesn't the PRO Act only affect you if you want to form a union?
This is an argument against the removal of the ABC Test I'm seeing a lot. And here's the issue with that:
The PRO Act is only Step 1.
President Biden specifically announced he wants the ABC Test used, not just when it comes to labor organizing. It's a key part of his platform, where he actually cites California's failures as justification for adopting the test that destroyed freelance businesses. And his plan specifically states:
As president, Biden will work with Congress to establish a federal standard modeled on the ABC test for all labor, employment, and tax laws."
- Labor law
- Employment law
- Tax law
Even if the PRO Act alone wouldn't shut down your freelance writing work, it would allow the ABC Test to be codified in federal law, making its inclusion in employment and tax law (which would absolutely affect our work as freelancers) much more likely.
And Yes, the PRO Act Could Still Affect Freelancers Immediately
If you've followed conversations around the PRO Act, you've probably noticed the previous concern being dismissed by union leaders and their supporters. They swear up and down that the PRO Act won't affect us, so we have no business being concerned about future legislation.
But that's utter horseshit.
The ABC Test in the PRO Act isn't guaranteed to be harmless on its own. It could cause problems for freelance professionals from Day One.
Closed union shops.
Let's say you write for a publication on a freelance basis as your subject matter expertise isn't needed by them regularly. If that publication's traditionally-employed writers -- people who shouldn't have anything to do with your third-party business contracts -- vote to unionize, they'd have the ability to vote for a closed shop (meaning their employer couldn't hire non-union writers).
What could that mean for freelancers?
You could be forced to join that union and pay dues, be forced into an employee relationship, or you'd risk losing your working relationship with your client. So yes, you need to be concerned now. This isn't only about the risk of what the current administration said it has planned next.
The time to fight back against the ABC test isn't after the PRO Act passes and the next round of legislation comes up for debate. It's now.
Contact Your Representative in the House
The most pressing issue is the PRO Act being brought back to the House the week of March 8th. Now is the time to tell your Representative you want the act amended to remove the ABC Test and have it replaced with the more modern IRS classification rules.
Contact Your Senators
If the PRO Act does pass the House in its current form, it's likely to face more resistance again in the Senate. So you can also contact your state's Senators by calling them or writing to them before the bill makes it to a vote there.
Not sure what to say?
If you're not sure what to say when you call or write to your representatives, Susan Valot of the Society of Professional Journalists' freelance community put together an outstanding collection of templates you can use, from a script template to sample letters.
More Ways You Can Help
In addition to contacting your representatives in Congress about amending the ABC Test, you can also help in the following ways:
- Submit an op-ed or letter to the editor to your local newspaper.
- Spread the word on social media (all freelancers, even outside the U.S. can do this to help make more U.S.-based freelancers aware).
- Share your own story about the benefits of being self-employed and what you'd lose under the ABC Test.
- Discuss the issue with non-freelancers in your life and ask them to contact their representatives on your behalf too.
- Make your clients aware of the ABC Test and get them to reach out to their reps as it could affect their businesses and whom they're permitted to hire.
The PRO Act unfortunately contains a poorly-thought-out, and already-failed, worker classification test. We already have a better option available. We need our leaders to make this change. This doesn't have to be union workers vs freelance professionals. The PRO Act should work for all workers. And there's still time to make sure it does.
If you'd like to learn more about the background of the PRO Act, Fight for Freelancers USA does a good job detailing the issues and history.