Confirmation season is well underway and although there has been significant saber rattling this cycle, twelve of the Trump nominees have been confirmed with ten still to go. The only exception being Matt Gaetz who withdrew early in the game. The remaining nomination hearings will be held through mid-February. The one many are watching is the Department of Labor pick, Lori Chavez-DeRemer. Her hearing is set for February 19th at 10AM and will be streamed on the US Senate website. If approved as labor secretary, Chavez-DeRemer 56 would oversee the Labor Department’s workforce and budget. She would also make decisions that impact workers’ wages, health, safety and ability to unionize, as well as influence employers’ rights to fire employees. But a key piece of legislation has become a focal point of discussion and is the PRO Act. The PRO Act very closely mirrors California’s AB5 legislation that creates an almost impossible bar for most companies to treat workers as Independent Contractors.
As previously written, there is significant backstory to this nominee and the political intrigue that comes with it. During the election season, Donald Trump and the Republican party made great efforts to carve off significant portions of the Labor vote with whom traditionally were ceded as Democrat voters. Post-Election analysis indicate they were very effective. One of those strategies was to have Teamster President Sean O’Brien speak at the RNC in Milwaukee. The DNC did not provide a similar invite as has been the custom. Mr. O’Brien then decided to not endorse either candidate which most considered a nod to President Trump. Very soon after the election, President Trump announced Lori Chavez-DeRemer as his pick for Labor Secretary. This was a shock to many in business and the Beltway and common thought was this would be a Pro-Business pick. But it appears that this strategy is not only transactional with this election but a longer term play to make Labor the foundation of the Republican Party. If they can accomplish this, this would fundamentally change politics in the US.
Secretary of Labor: A Political Shift?
Ms. Chavez-DeRemer’s father was a Teamster and she is one of the co-authors of the PRO Act as a Republican. It is believed she was on the top of the list of Sean O’Brien if asked by President Trump for recommendations. No way to confirm this but the bread crumbs are what they are. As should be expected, many PAC’s have been meeting with the nominee for Q/A. Her Position: President Trump does not support the PRO Act and she will follow the direction of the President. Upon further pressing of her personal view, she has declined to answer. I would anticipate further pressing on her views and subsequent endorsements or not of those constituent groups. In my opinion, Confirmation is not in question. She has overwhelming support of the Senate Democrats, so that gives her 47 votes or close to it and I would anticipate the majority of Republicans will support her as the President’s nominee. So anticipate this being a done deal.
So where does this leave the PRO ACT?
First, let me provide some additional background.
- California AB5 was enacted in 2019
- It has endured volumes of challenges and numerous appeals and all have failed in California. Appears those are now done and AB5 is the law of the land in CA
- The only sector that has avoided compliance is UBER and LYFT as they got a referendum from the voters to exclude them. Appears CA voters with the idea of losing UBER on a Saturday night voted them a carve out. But that’s it, everyone else has to deal with the “B Prong” of the ABC Test
- Under the ABC test, a worker is considered an employee and not an independent contractor, unless the hiring entity satisfies all three of the following conditions:
- A The worker is free 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 that is outside the usual course of the hiring entity’s business; and
- C The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed
- Under the “B Prong” it is hard to defend a Truck Driver driving for a Carrier or a grocery worker working shelves in a grocery store for a CPG company/Broker or a computer programmer being a “Jobber” for a Tech company and paying them directly. It is estimated that over 90% of IC’s in California will be considered mis-classified vs ABC.
- Now to what has not been broadly reported
- Since 2019, where California was the first and only state with ABC. Labor has been working the halls of state legislatures hard. There are now Thirty-Five states that have the ABC Test with almost identical language in just the last five years and more coming. Some are now starting to get very aggressive like NJ, IL, MA, etc. Multi-Million$ lawsuits have already made their way through many court systems.
- Clearly, the billions of tax revenue and greater oversight of workers is a key objective of the state governments. But the other key driver of this is the Unions. Now that these workers are employees, these workers can potentially be Unionized, IC’s cannot be Unionized.
So I would ask a simple question. Does it really matter if the PRO Act passes at the Federal level?
- Thirty-Five States have ABC on the books, well over half the Union
- Many of the remaining states have ABC legislation in process
- ABC States are now imposing and winning large misclassification lawsuits
- For business, trying to change business practices between states is unworkable
- So again, does it really matter if a State files a lawsuit against you or the Dept of Labor does it?
I believe the Facts suggest the Tipping Point has already been met…