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Small Business Owners Fear the PRO Act's ABC Test

The PRO Act's ABC Test threatens mutually beneficial relationships with independent contractors

Opinions expressed by Entrepreneur contributors are their own.

This story is part of Entrepreneur's Campaign For Our Careers, an effort to raise awareness about the harmful effects of the PRO Act. For more about the campaign, click here.

Rigo Santoyo

For people like Margarita Reyes, being able to produce and act in independent films isn't just about earning a living. It's also about honestly portraying characters who aren't white.

"As a Latina actor who has been in this business for over 20 years, in order to do the roles we want—the roles that aren't stereotypical—we have to write our own roles and create our own projects," says Reyes (pictured above).

Producing her own films meant Reyes routinely hired independent contractors. Everyone from production assistants to gaffers to grips would earn a minimum of $25 an hour, she says, with higher rates for more technical roles—that is, until California enacted a law called Assembly Bill 5. The law, which used something called an "ABC Test" to determine who could and could not be an independent contractor, made it illegal for those business relationships to continue unless Reyes made everyone on set an employee. Many of her contractors didn't want that.

"We now have less people wanting to work," she says. "I lost people that I would contract with as crew. Two had to move out of state so they could keep working."

Today, Reyes is watching in disbelief as federal lawmakers say they intend to follow California's lead. The same ABC Test is in the Protecting the Right to Organize Act, or PRO Act—which proponents are promoting as "civil rights legislation" despite the economic harm this ABC Test caused for marginalized people like Reyes, along with other Californians in hundreds of professions.

"You cannot create blanket legislation to cover all of these different professions and say you're protecting them," Reyes says. "You're actually making life harder."

Across the country in New Jersey, Bradley Madsen also fears the ABC Test in the PRO Act. He's a musician and bandleader who, depending on what a client wants, organizes different groups of musicians into bands. "In a typical year, I probably have 25 musicians that I would consider the regulars, and then a pool of about 40 additional musicians that I use as substitutes," Madsen says. "That pool would shrink substantially if I had to bring them all on as employees and have the costs of onboarding them as employees."

Not only does Madsen prefer being able to hire all kinds of musicians as independent contractors, but he also wants to remain self-employed as a musician himself.

"If I want to take weekends off, I want to have that freedom to turn down work," he says. "If I'm someone's employee, they have the right to approve when I'm taking off. If my sister is getting married, they can say, "No, I need you to be here.' Then I'm stuck. I can quit and lose all the work, or I can miss my sister's wedding."

Jason Lindsey, an Illinois-based commercial photographer and filmmaker, says he agrees with lawmakers who want to stop bad-actor companies from intentionally misclassifying people as independent contractors when they should, in fact, be employees—say, if they're working 40 hours a week, 52 weeks a year for just one company. But that's different from reclassifying legitimate independent contractors as employees, to the point that companies fear being subject to fines for hiring contractors at all. States like California, he says, are so strict that when he puts together teams for projects there, he hires most people through a payroll service. They become employees of the middleman.

"Some crew don't mind that, and some crew don't like it," he says, adding that in some cases, the employee designation feels far-fetched. "I've never even met some of these people before, and I may never work with them again, and they're an employee of mine because I hired them for 10 hours one day?"

Madsen says it's nonsensical for the PRO Act's ABC Test to define him as an employee of his clients under law.

"A lot of my career is based on one guy needing me two or three times a year, and another guy needing me two or three times a year," he says. "I have easily 20 contractors that book me once or twice a year."

Reyes, having lost income to the ABC Test law in California, says copying the language into the federal PRO Act should be a nonstarter. She disagrees with those who claim the bill will protect her rights, because she feels happier earning a living as her own boss. She used to have a traditional, 9-to-5 job, and she found the system toxic compared to what she has achieved as an independent contractor.

"Working project-based, it's a week, maybe a few weeks, maybe a day, and then you move on to the next one," she says. "No one can tell you that you have to work 70 hours a week when they originally said it was 40. I have the power to say, "This is what my time is worth, and I have the experience to back it, and you're not going to take that away from me.'"

Here's how to contact your senator and U.S. House representative and tell them to vote no on the PRO Act.

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