October 27, 2020

The Worker Flexibility and Small Business Protection Act is a ‘frowning sad face’ of a bill

The Worker Flexibility and Small Business Protection Act may be one of the first times that a bill in Congress would require anyone to use an emoji. But if it passes, a frowning-face emoji would understate how entrepreneurs, small business owners and franchisors will feel.

Introduced by labor policy leaders in the Democratic Party and backed by the AFL-CIO and Service Employees International Union (SEIU), the bill appears to be a direct attack on independent contracting, as well as the franchise industry, and a gift to unions and trial lawyers. 

The bill would destroy the gig economy model and independent contracting by presuming that everyone working for pay is an employee. 

The legislation would create the same test that has done so much damage to California’s independent contractors — even the California state sponsor of the act said it went too far. But California recently passed a host of exemptions to its law, which do not exist in the federal legislation. 

The legislation does not hide its intent to bolster union rolls and boost dues. It specifically exempts certain transportation and delivery companies from minimum wage and overtime regulations if they are under a collective bargaining agreement. In other words, as long as Uber or Instacart give in to unionization, they will not have to worry about certain employment laws. 

The bill also targets the franchise industry by legislating the joint employer rule. “Joint employer” means that distant franchisor corporations would be considered the employer of workers in small mom-and-pop businesses. This is a boon to union organizing, since unions can focus on the large corporation, rather than having to target each franchisee. 

But the bill doesn’t stop there; it adds incredible burdens to both employers and the Department of Labor. 

The legislation creates scheduling headaches for job creators. Any denial of an employee’s scheduling request — the number of shifts, hours per day and days per week, plus work location and unpaid time off — must be justified in writing by “a compelling business necessity.” An employee who disagrees with a denial can appeal to the Labor Department, which could overrule the employer. Every single employee under the act could appeal every single denied shift request to the federal government.

The penalties and the breadth of liability in the bill are extreme.   

Wrongly classifying an employee as an independent contractor could cost an employer $10,000 for early offenses, but “repeated or willful” offenses could mean a fine of up to $30,000. If the misclassification was “widespread,” fines would be raised to 1 percent of net profits for the most profitable year the business was considered to be in violation. 

For other violations, employers would be responsible for all “corporate family employees,” vastly expanding liability to all subsidiary employees. Similarly, a civil penalty could be levied against directors, officers and managing agents if they were involved in a violation or did nothing to stop it. The top 10 shareholders of a company would be personally liable for all violations and would pay 10 percent of the civil penalties, restitution and other fees levied against the employer. 

Reporting and appeals would create a mountain of paperwork and liability.

The bill summary says that companies with 100 or more employees would need to create “a supply chain responsibility plan that details how the employer will attempt to ensure that its supply chain does not include employers that regularly violate workers’ rights (across all labor laws, including foreign countries’ national labor laws).” The employer would need to submit the plan to the Labor Department yearly, with a penalty for noncompliance of $50,000 per month.

Back to the emoji, the bill requires employers to post a public notice of their compliance with labor laws and update it annually. The notice must include “an emoji face or cartoon face that reflects such summary,” ranging from a “very open-mouthed smiling face” for an excellent rating to “frowning sad face” for a “needs improvement” rating. 

All ratings would be reported to the Labor Department, which would be required to post them to a newly created website. An employer that fails to post the notice, both physically and on its own website, would be fined $1,000 per worker per day. It then would be required to publish the rating in a local newspaper. The goal would be that everyone could see federally mandated emoji scarlet letters.

The bill language is clear on its one-sided nature, saying all protections “shall be interpreted expansively in favor of the employee” and exemptions “shall be interpreted narrowly against the employer.”

F. Vincent Vernuccio is a senior fellow at the Mackinac Center for Public Policy, a research and educational institute in Midland, Mich. Follow him on Twitter @vinnievernuccio.

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