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Here’s how the PRO Act would impact freelance and gig workers



As the National Labor Relations Board reviews ballots from [hotlink]Amazon[/hotlink].com’s union election in Alabama, the U.S. labor movement is entering a pivotal moment that will likely define the future of worker organization for decades to come. 

The campaign to organize the more than 5,800 workers at Amazon’s warehouse in Bessemer, Ala. has also drawn new political lines in the debate around the right to unionize. [hotlink]Progressive[/hotlink] senators such as Bernie Sanders (I-VA) and Elizabeth Warren (D-MA) have rallied on behalf of the union, as expected. But other supporters, like Sen. Marco Rubio (R-FL). have also spoken out on behalf of the employees looking to organize, a surprise as Republicans typically support legislation that favors business and diminishes union efforts. 

“Here’s my standard: When the conflict is between working Americans and a company whose leadership has decided to wage culture war against working-class values, the choice is easy—I support the workers. And that’s why I stand with those at Amazon’s Bessemer warehouse today,” wrote Rubio in an opinion piece for USA Today this month. 

The sudden shift comes as House Democrats approved a bill, The Protect the Right to Organize (PRO) Act, which would make some of the most dramatic, and controversial, union-friendly changes to American labor law in decades. Labor advocates have called it the most important piece of labor legislation in generations, while big business groups say that it will harm independent contractors and bottom lines. 

The act would extend joint employer liability (in which an individual who is not on an organization’s payroll, and is contracted from another company, could still be considered their employee), expand the definition of employee by narrowing the definition of supervisor and independent contractors, simplify union election rules, end right-to-work protections that prohibit employees from being forced to pay union dues as a condition of their employment, allow for more strikes and make it more difficult for employers to replace workers on strike, and mandate initial collective bargaining agreements within as little as 120 days, amongst other things.

It’s unlikely that the act will pass through the divided Senate without Democrats first eliminating the filibuster, an act that requires 60 votes to invoke cloture on legislative matters and prevents parties with a small majority from voting partisan bills into action. 

And while it may appear that some Republicans like Rubio have had a change of heart about union efforts, his support of Amazon workers in Alabama is actually linked to his opposition of the PRO Act. “What our nation desperately needs is not more oligopolies like Amazon or hostile relationships; what we need is a more productive relationship between labor and management,” he wrote in his opinion piece. “Legislation like the Democrats’ Protecting the Right to Organize Act would essentially mandate adversarial relations between labor and management.”

Parts of the bill, however, could end up passing through the Senate and make their way to President Joe Biden’s desk, who has spoken out in support of the act. The thought has companies like [hotlink]Uber[/hotlink] and Instacart, which rely on gig workers who are not considered employees, as a large part of their business model. The groups have long seen the writing on the wall, and have previously launched campaigns in California and New Jersey, states that already have their own version of the PRO Act, and have made it illegal for employers to misclassify workers as independent contractors. 

App-based workers 

The PRO Act would adopt the same test that California uses to determine a worker’s employment status, but only for the purposes of union organizing: 

  • 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.

  • The service is performed outside the usual course of the business of the employer.

  • 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.

In response to the California changes, Protect App-Based Drivers & Services was launched, an organization infused with a cool $200 million from Uber, [hotlink]Lyft[/hotlink], Instacart, and Doordash. The group created websites and ad campaigns and held rallies protesting the bill. 

They also spread false information to drivers, claiming that if they were reclassified as employees “scheduling and rigid shifts would become the norm, and Uber would likely prevent drivers from working for other rideshare companies.”

But legal experts say there’s nothing in California law that requires shift scheduling. San Diego City Attorney Mara Elliott laughed when asked if there was any legal precedent for employees being required to work shifts. “There are no requirements that hours be contiguous, either. I generally just don’t know where they’re coming from,” said San Diego Chief Deputy City Attorney Mark Ankcorn.

Still, their efforts were successful. Workers for app-based services were made exempt from the law by a ballot initiative, Proposition 22, which the companies bankrolled. Similar efforts have been made around the PRO Act, with the goal of swaying both politicians and workers against it. 

Uber and Lyft have hired boardrooms full of former top democratic officials, including Vice President Kamala Harris’ brother-in-law Tony West, who serves as Uber’s chief legal officer, to try to increase their political influence and sway policymakers in D.C. They have spent vast sums of money to lobby against the bill as well. 

Campaigns, much like in California, have been launched to explain to workers that they would end up giving away freedom instead of gaining protection under the law. 

App-based companies have legitimate worries about the operating costs of millions of workers unionizing and bargaining for fair pay and benefits. They claim that they will have to limit the number of drivers they hire and that they will have to pass new costs along to their riders, lowering demand. 

Employees, unlike independent contractors, qualify for local minimum wage laws, health and unemployment insurance, and other social programs. They can also unionize and bargain for more. That’s a lot of extra cost for app-based companies that are not yet profitable. Research analysts at [hotlink]Barclays[/hotlink] estimated in a report that before app-based gig workers became exempt the reclassification in California cost $3,625 per driver. Uber reported a net loss of $968 million during the fourth quarter of 2020. 

Labor leaders argue that a business model which relies on the exploitation of labor is never sustainable, regardless of legislation. 

Other freelancers 

Many white-collar freelancers, like accountants and journalists, also worry that the ABC test might hurt their bottom lines. Employers might worry that hiring them will violate the law, and they’ll lose out on income, they argue. 

But what is not being made clear by lobbyists and business advocates is that the ABC test used in the PRO act is just for determining whether a freelance worker is able to participate in a union contract, not if they have to be onboarded as a full-time employee to do work for a company. 

“Nothing in the PRO Act outlaws any kind of work arrangement. The PRO Act’s ‘ABC test’ only determines who qualifies for NLRA protection if and when they try to engage in collective action, organize a union or bargain collectively,” wrote the AFL-CIO. “The PRO Act does not affect any of the laws that typically determine whether someone is hired as a W-2 employee, most notably tax law, but also minimum wage, overtime, unemployment insurance, workers’ compensation, etc.”

It’s not unusual for states to use the ABC test for selective purposes only; some use it to determine who gets unemployment benefits, and others use it to determine minimum wage or overtime protections only. 

If a workplace is unionized, however, certain “permalancers”—a colloquial term for long-term freelance contract workers who do not have employee benefits—may be unable to negotiate special contracts with their employers and would instead have to abide by the union contract. 

More than a quarter of Americans now rely on the gig economy to supplement their income in some manner, and one in 10 rely on it as their primary source of income. Those numbers have increased with the rapid increase in unemployment due to COVID-19, but financial volatility and access to benefits are major challenges for these so-called independent contractors.

“As America works to recover from the devastating challenges of deadly pandemic, an economic crisis, and reckoning on race that reveals deep disparities,” said Biden in support of the act. “We need to summon a new wave of worker power to create an economy that works for everyone.”

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Workers, Inc. (NASDAQ:AMZN), (DASH) – COVID Relief Bill Could Trigger Larger Tax Bills For Gig Workers




Gig workers and third-party sellers on e-commerce platforms such as Etsy, Inc. (NASDAQ: ETSY), Walmart Marketplace (NYSE: WMT) and even Amazon (NASDAQ: AMZN) could find themselves with tax issues in 2022 thanks to a change in Internal Revenue Service tax codes contained within the American Rescue Plan Act of 2021.

The $1.9 trillion COVID relief bill that just passed the U.S. House and Senate and is expected to be signed into law by President Joe Biden by this weekend amends Section 6050W of the IRS code to require reporting for any transactions that exceed $600 in gross sales through a 1099-K form.

This change means not only are workers required to claim this income on their taxes (as currently required), but any business that pays them, such as Uber (NYSE: UBER), Lyft (NASDAQ: LYFT), DoorDash (NYSE: DASH) and even marketplaces like Etsy (NASDAQ: ETSY), will be required to submit a 1099-K to the IRS on the individual’s behalf. Under current law, payment organizations must only file a 1099-K form on behalf of a seller when total sales exceed $20,000 and/or total transactions exceed 200 in a tax year.

“Payments made in settlement of third-party network transactions, however, are required to be reported only if the amount to be reported exceeds $20,000 and the aggregate number of transactions exceeds 200 with respect to any payee within a calendar year,” Internal Revenue Bulletin: 2011-23, issued in 2011, says.

“There is a segment of the population that is probably making ends meet and of course they should be aware of their tax obligations, but as they try to cobble together an income, should we be going after these people?” asked Katie Vlietstra, vice president of government relations and public affairs for the National Association for the Self-Employed (NASE).

Vlietstra told Modern Shipper NASE believes all sellers and gig economy workers should be meeting their tax obligations, but the new requirement, which goes into effect on Jan. 1, 2022, could have unintended consequences.

“Every individual should be meeting their tax obligation. They should understand their tax liabilities,” she said. “Our concern is … when you are making big fundamental changes, there isn’t a lot of emphasis placed on the technical changes.”

Vlietstra noted the DoorDash driver who makes money on the weekend to supplement a full-time job.

“Is that their true income [on the 1099-K]? Is that expenses? Do they understand what that means?” she said. “My position on this is maybe $600 is the right amount – we have seen some states that have moved to that reporting level – but there hasn’t been a [conversation with] people who are working in the diversified economy.”

Read: Getting gig workers the unemployment they deserve

NASE will be focusing on education this year to ensure everyone complies with the new regulation, and Vlietstra said it will continue to “voice to Congress that we need to circle back on this.”

“I think there are some unintended grabs that could happen,” she added. “Everyone should be meeting their tax obligations, but if I’m selling my table for $800 more than I paid for it, [do I need to claim that]? Overall, the bill was good. We need to get back to work. We need small businesses to get back to work … but in a massive $2 trillion bill, things get thrown in.”

For businesses, the change is straightforward – they need to monitor and report any income they pay out exceeding $600. That includes online marketplaces that are facilitating these transactions. But for third-party sellers on platforms like Etsy, it gets more complicated, requiring more tracking of expenses as income that may have slipped under the IRS’ radar before may no longer.

“You need to be tracking your expenses and what is a qualified business expense,” Vlietstra said. “Make sure you understand what this really means for your tax exposure. Make sure you are tracking gas and meals and other things. As taxes get more complicated, they may need help doing their taxes.”

There are several open questions, though, Vlietstra said. An example would be an individual who sells tickets on a platform such as StubHub. Is that a business? Does that single transaction, if it exceeds the $600 limit, trigger a 1099-K? What about roommates who may pay each via Venmo for utilities? At the end of the year, those transactions could exceed $600, but should that money be claimed as income? How would the roommates record that on a tax return if Venmo issued a 1099-K? And how does a platform such as Venmo know what should be considered income? The answers to these questions, Vlietstra said, are to be determined, but she is concerned that situations such as this could trigger unnecessary IRS audits.

“I feel like we put our finger in a hole and there are still 500 holes spitting water at us,” she said.

Click for more Modern Shipper articles by Brian Straight.

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Ruling in arbitration case bad news for gig workers – Massachusetts Lawyers Weekly




A recent decision from the 1st U.S. Circuit Court of Appeals found that a housecleaner who claimed her employer had misclassified her as an independent contractor couldn’t sue because she was bound by a “clickwrap” mandatory arbitration agreement.

The plaintiff in Emmanuel v. Handy Technologies, Inc. had submitted an application through the website of a company that assigns housecleaning jobs to workers and clicked a checkbox agreeing to its terms of use.

She subsequently used the company’s mobile app to accept an independent contractor agreement, which was required for her to be connected with customers.

The 15-section agreement included a mandatory arbitration clause in section 12. That portion was not visible unless the user scrolled down through the entire agreement.

The plaintiff performed between 10 to 20 cleaning jobs for the defendant but stopped working because of payment issues. She then brought a putative class action alleging that she and others had been misclassified as independent contractors in violation of the state Wage Act and the federal Fair Labor Standards Act.

When the defendant moved to compel arbitration, the plaintiff argued that she did not have sufficient notice of the arbitration clause to be bound by it.

But the 1st Circuit disagreed. Applying the standard set forth earlier this year by the Supreme Judicial Court in Kauders v. Uber Technologies, Inc., it concluded that an online contract had been formed because the plaintiff had “reasonable notice” of the terms and made a “reasonable manifestation of assent” to those terms.

The court acknowledged that only a portion of the agreement was immediately visible on the plaintiff’s phone screen, and that portion did not include the arbitration provision. But it took the position that it was sufficiently clear that “additional text further specifying the terms of the Agreement could be viewed by scrolling.”

In doing so, it specifically declined to read Kauders as holding that for a user to be bound by terms visible only through scrolling, he or she must be required to scroll through the full text of the agreement.

The problem with that reading is that it fails to take into account that workers like the plaintiff are largely unsophisticated, low-wage gig workers. They are encountering long, dense agreements like the one in Emmanuel on their phones, which makes thorough review next to impossible. Moreover, they are not in a position to negotiate over the terms of such an agreement.

In fact, in some ways, these workers are more similar to consumers facing “take it or leave it” arbitration provisions than traditional employees.

It’s unfortunate that decisions like this one gloss over that reality.


Massachusetts Lawyers Weekly’s Editorial Advisory Board provides knowledge and guidance for the editorials that appear on this page. The board is an advisory panel only, with no official voting or participation record. The input from the board is a tremendous resource to Lawyers Weekly; however, the editorials represent the position of the newspaper and its editorial staff, not the members, nor any given member, of the board. 

BOARD OF EDITORS: Robert J. Cordy, Boston; Sophia L. Hall, Boston; Martin W. Healy, Boston; Hon. Margaret R. Hinkle, Boston; Thomas M. Hoopes, Boston; Regina M. Hurley, Boston; Shiva Karimi, Boston; Hon. Rudolph Kass, Boston; Marsha V. Kazarosian, Haverhill; Andrea C. Kramer, Boston; Renee M. Landers, Boston; Richard L. Levine, Boston; Elizabeth N. Mulvey, Boston; Eric J. Parker, Boston; C. Max Perlman, Boston; Patricia M. Rapinchuk, Springfield; Martin R. Rosenthal, Boston; Jeffrey Sacks, Boston; Carol A. Starkey, Boston

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6 Ways Gig Workers Can Invest for Retirement | Business




In 2021, you can contribute up to $13,500 if you’re under 50, or $16,500 if you’re 50 or older.

There’s no Roth option, so you’ll be taxed upon withdrawal. There’s also a steep penalty if you need to withdraw your SIMPLE IRA funds within two years of setting up the account: 25%, instead of the usual amount, on top of taxes.

As the employer, you’ll have to contribute to your SIMPLE IRA on your own behalf, as well as for any employee who’s earned at least $5,000 in at least two of the past five years and expects to earn at least that much for the current year. You’ll have to choose one of the following formulas:

  • Automatically contribute 2%.
  • Match 3% of contributions dollar for dollar.

Due to the lower limits and the extra layer of rules, a Solo 401(k) or SEP IRA is typically a better option for solo gig workers. However, if you expand and add others to the payroll, a SIMPLE IRA may be a good option.

6. Taxable Brokerage Account

If you’ve exhausted your other retirement savings options or you want the flexibility to invest with fewer rules, a plain old taxable brokerage account works. Since you won’t get any tax breaks for investing in a brokerage account, though, aim to max out your Roth IRA or traditional IRA contribution before you go this route.

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