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Senate Committee Holds Hearing on Reclassifying Independent Contractors

The PRO Act would drastically change the nation's labor laws and includes a provision that could significantly impact the independent agency system.
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senate committee holds hearing on reclassifying independent contractors

This week, the U.S. Senate Committee on Health, Education, Labor and Pensions held a hearing titled, “The Right to Organize: Empowering American Workers in a 21st Century Economy." The hearing focused on S. 420/H.R. 842, the “Protecting the Right to Organize (PRO) Act," which recently passed the U.S. House of Representatives in a 225-206 vote.

The PRO Act would drastically change the nation's labor laws and includes a provision that could significantly impact the independent agency system. Among other things, the legislation seeks to change the definition of “independent contractor" in a way that could cause significant disruption to the financial services and property-casualty insurance markets, including independent insurance agents and the consumers they serve.

Specifically, the legislation incorporates the “ABC" test by requiring workers classified as independent contractors to:

A. Be “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. Perform service “outside the usual course of the business of the employer."

C. Be “customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed."

By reclassifying many independent contractors as employees, the PRO Act would create unintended consequences for insurance producers, independent broker-dealers and independent financial advisors. The PRO Act's “ABC test" could eliminate the choice a majority of practitioners have made to serve clients independently. In turn, that could drastically reduce clients' ability to access high-quality advice for their insurance, investment and retirement needs. Additionally, the PRO Act would increase costs on small businesses as they try to recover from the pandemic.

The Big “I" opposes the legislation in its current form and joined a broad coalition in the financial services and insurance industries in sending a letter to Patty Murray (D-Washington), Senate Committee on Health, Education, Labor and Pensions Chairwoman, and Richard Burr (R-North Carolina), Committee Ranking Member, seeking an exemption from the ABC test for insurance agents and financial advisors.

As this legislation makes its way through Congress, we will continue to provide members with updates in the weekly News & Views e-newsletter.

Wyatt Stewart is Big “I" assistant vice president of federal government affairs.

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Thursday, July 29, 2021
On the Hill