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The 2024 PRO Act: A Threat to Independent Field Service Professionals

Trade Service Pro / Blog / The 2024 PRO Act: A Threat to Independent Field Service Professionals

What Small Business Owners and Subcontractors Need to Know About This Legislation

The 2024 Protecting the Right to Organize (PRO) Act threatens a wide range of small businesses, including field service pros and independent tradespeople. Yet, many in the industry have never heard of it.

While politicians promoting the PRO ACT claim the bill will strengthen workers' rights, it could have dire consequences for small and independent field service businesses and the subcontractors who work with them. For example, if the PRO ACT passes, an electrician who currently operates as an independent contractor might be forced to become an employee of a larger company, losing the flexibility and autonomy they currently enjoy.

Similarly, a small plumbing business that relies on a network of independent contractors might face significant financial burdens if these contractors are reclassified as employees. Passage of the PRO Act could result in dire consequences for these entrepreneurs. The bill would allow the National Labor Relations Board to impose some hefty fines on employers; employers could be forced to pay up to $50,000 for each labor law violation and up to $100,000 for repeat offenses.

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Understanding Independent Field Service Professionals:

Tradespeople who are members of a union are typically part of a larger organization that represents workers in their industry. Unions negotiate contracts with employers on behalf of their members, advocating for fair wages, benefits, and working conditions. However, they typically have little autonomy in setting their rates and schedules, as these are often governed by union agreements.

Conversely, independent professionals in the home services industry are small business owners and the techs who work with them to provide essential services to homeowners and businesses alike. These are people who value independence and flexibility, the ability to manage their schedules, and the ability to work on a project basis or through service contracts. They enjoy the freedom to set their own hours, decide how much to charge for a project, and to work the way they want.

The PRO Act and Its Implications for the Small Business Owner:

The PRO Act could be detrimental to independent trade service professionals in the following ways:

1. Classification as Employees: The PRO Act's strict "ABC test" for determining employment status could hurt independent contractors who work in the trades by reclassifying them as employees. Doing so could impose significant burdens on both these professionals and the companies they work with.

2. Loss of Autonomy and Flexibility: Independent trade service professionals cherish their independence and the ability to manage their businesses on their own terms. The PRO Act's potential reclassification of them as employees could strip them of this cherished autonomy and flexibility, subjecting them to more rigid work arrangements and schedules.

3. Increased Financial Burdens for Small Businesses: Navigating employment regulations is already a challenge for small businesses, and the PRO Act could exacerbate these challenges. It could impose additional compliance requirements associated with employee status, including payroll taxes, employee benefits, and insurance. The PRO Act's passage could significantly impact the already slim margins of independent field service companies, leading to higher service costs for consumers or reduced earnings for the professionals themselves.

4. Threat to Entrepreneurship: The PRO Act could potentially discourage individuals from pursuing entrepreneurship opportunities within the trades and field services industry. This could harm innovation and the spirit of entrepreneurship that drives the industry, leaving many professionals worried about the future of their businesses.

5. Limited Negotiation Power: Independent service businesses negotiate directly with clients or engage in limited collective action. Stricter labor regulations under the PRO Act could weaken their bargaining power and limit their ability to negotiate favorable terms.

The Impacts of a Similar Legislation: California's 2020 Assembly Bill 5 (AB5)

Much like California Assembly Bill 5 (AB5), which went into effect on January 1, 2020, and significantly impacted various industries, including independent field service businesses, the ProAct has many entrepreneurs concerned about the future of their businesses. AB5 aimed to classify more workers as employees rather than independent contractors to ensure they receive benefits and protections like minimum wage, overtime pay, unemployment insurance, and workers' compensation.

The passage of California's AB5 led to concerns and challenges for many businesses in construction, maintenance, repair, and similar sectors. Due to their work's seasonal and project-based nature, many of these businesses relied heavily on independent contractors for their workforce. AB5's stringent criteria for classifying workers as independent contractors rather than employees made it more difficult for these businesses to maintain their existing labor models.

Under AB5, businesses must meet three criteria (known as the ABC test) to classify workers as independent contractors:

A: The worker is accessible from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact

B: The worker performs work outside the usual course of the hiring entity's business.

C: The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Failure to meet any of the ABC criteria could result in a worker's reclassification and entitle them to various benefits and protections. Proponents of ProAct may argue for similar protections and benefits for workers at the national level. At the same time, opponents of this legislation raise concerns about the potential impact on businesses, particularly small businesses that rely on independent contractors. Overall, AB5's impact on independent trade service businesses highlights the complex interplay between labor laws, business models, and worker rights, a central theme in the ongoing debate over legislation like the ProAct.

While the PRO Act does pose some threat to small business owners and independent field service professionals, safeguarding against the exploitation of workers is certainly important. It is essential to everyone that a balance is struck between protecting workers' rights and preserving the livelihoods of independent professionals and small business owners. Unfortunately, policymakers often fail to consider the unintended consequences of their interference in the free market.

The PROACT may be yet another instance of good intentions leading to dire consequences. We encourage you to learn more about the PRO Act and its potential impact on your business. You may want to consider taking action to protect your interests or, at the least, pay attention to this piece of legislation.