A piece of legislation that President-elect Joe Biden said he intends to sign into law could potentially affect how freelancers secure gigs and make a living.
Called the PRO Act, the bill, which passed the House earlier this year, largely focuses on strengthening workers’ rights and unions. However, some freelancers are taking issue with an aspect of the bill that’s been dubbed the “ABC test,” a three-pronged assessment that determines whether workers are considered employees or independent contractors.
The ABC test is meant to prevent employers from misclassifying certain workers as contractors, thereby avoiding having to provide them the perks and benefits employees typically receive.
Erin Hatton, an associate professor at the University at Buffalo who studies the sociology of work, said employers sometimes try to “evade their legal responsibilities for workers” by classifying them as contractors instead. As an example, Hatton pointed to FedEx, which has faced lawsuits for hiring drivers as “contractors” to save money on things like overtime pay.
The ABC test aims to prevent such occurrences by clearly defining what makes someone a contractor. Under the ABC test, workers who do not meet the precise definition of a contractor are considered employees and therefore are entitled to benefits such as paid leave and workers’ compensation.
But the rigorousness of the ABC test—which is already in effect in California as part of a state law called AB-5—can make it difficult for freelancers to retain their status as independent contractors. Companies that can’t or don’t want to make their freelancers employees are forced to cut ties with them, leaving them with fewer opportunities.
While the aim of the PRO Act is to protect workers from unfair treatment under a contractual agreement, it doesn’t necessarily take into account the nuances of freelancing. Freelancers often choose to work independently instead of being tethered to one company. They may not need or want the protections afforded by full-time employment.
“The idea behind these laws is to protect workers that might be abused,” said Steve King, partner at Emergent Research. “There are plenty of workers who need those protections, but unfortunately, those laws are negatively impacting people who don’t.”
What is the ABC test?
To be considered a contractor and not an employee, freelancers have to meet the ABC test’s three requirements.
The “A test” essentially involves proving that they’re free from the company’s control. King said the freelancer would need to show that they work on their own time and schedule; in other words, that they aren’t beholden to the company’s working hours or workplace.
The idea behind these laws is to protect workers that might be abused.
Steve King, partner, Emergent Research
The “C test” is somewhat similar, in that it asks that the freelancer be established in a particular trade. According to King, establishing an LLC can help freelancers bypass this requirement, as it signals that the freelancer has their own business that offers a certain type of service to multiple clients. In essence, it illustrates that the freelancer works with various businesses and is unlikely to be at the whim of a particular employer.
For freelancers that work at advertising agencies, the “B test” is arguably the biggest hurdle. This aspect of the ABC test basically says that freelancers cannot be hired for jobs that can already be done internally. For instance, an agency could hire a plumber as a contractor since advertisers don’t specialize in plumbing. Bringing on a freelance art director, however, would be a different story.