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Promoting, protecting, and researching the optimal use of incentives, corporate gifts, rewards, recognition, awards, incentive travel, promotional products and related promotions in business.

Current Legal/Legislative Updates and Industry Initiatives

The Proposed PRO Act of 2021 Might Effectively Eliminate Independent Contractor Status – IFI’s Washington Update, March 12, 2021

On March 9, 2021, the House of Representatives passed H.R. 842, Protecting the Right to Organize Act of 2021 (the “PRO Act”), by a vote of 225-206, with five Republicans joining the Democrats in favor of it.  If enacted, the PRO Act would represent the most sweeping changes in labor law in a very long time.  The five most important provisions of the Act are as follows:

  1. The PRO Act would override “right to work” laws that are in effect in 27 states. These laws generally allow workers in workplaces represented by unions to opt out of the union and avoid union dues.  Currently workers who work for such companies would continue to be covered under the wage and benefits contract that the union has negotiated in its collective bargaining agreement with the employer.  If enacted, the PRO Act would override state right to work laws and allow unions to collect dues from those who opt out to cover the cost of collective bargaining and administration of the contract.
  2. The Act would forbid employer interference in and influence over union elections. Currently, companies use the well-worn tactic of company sponsored meetings with mandatory attendance to lobby against unionization drives.  In addition, employees would be allowed to vote in elections regarding whether to organize at location outside of company property.
  3. When a successful union drive still fails to achieve an initial contract between employer and employees, the PRO Act would permit newly certified unions to seek mediation and binding arbitration to settle negotiations that have reached a stalemate.
  4. The PRO Act would prevent employers from using the immigration status of an employee against him/her in determining the terms of employment.
  5. The PRO Act contains substantial civil penalties and liquidated damages for violation of workers’ rights. In some instances, directors and officers could also be held liable.  It also contains various statutory remedies in cases of discrimination and retaliation.

While one’s views on the efficacy of the main provisions of the proposed law can vary, it also contains an important change in the definition of independent contractor status that is worrisome and not terribly well conceived.

It would define an independent contractor using what is commonly known as the ABC test, a holdover from the 1930s, before the Internet and the gig economy.  Section 101(b) of the PRO Act would amend section 2(3) of the National Labor Relations Act (29 U.S.C. section 152(3)) to provide that an individual performing any service would be deemed to be an employee and not an independent contractor unless: “(A) the individual is 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) the service is performed outside the usual course of the business of the employer; and (C) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.”

To see the complete Washington Update of March 12, 2021 written by George Delta, IFI’s Legal Counsel, click here.

There is a long-standing debate about whether individuals who provide services to a business are employees or independent contractors. That debate saw a resurgence in 2019, when California’s governor signed Assembly Bill 5 into law. The legislation, which was revisited in 2020, effectively bans companies from classifying most workers in California as independent contractors. The law also outlines some exceptions to the employment standard and establishes a three-pronged test for determining independent contractor status in California.

Soon after California’s Assembly Bill 5 was passed into law, the U.S. House of Representatives passed a similar measure. The Protecting the Right to Organize (PRO) Act amends the National Labor Relations Act to establish a new federal definition of the term “employee” which expressly eliminates independent contractors in the U.S. The new legislation makes a broad presumption that all workers in the U.S. are employees unless each element of a newly established “ABC” test can be demonstrated.

The relevant state legislation and the PRO Act changed the nature of the discussions concerning labor classifications and independent contractors. Before last year, these conversations involved classifications pursuant to tax legislation. Because of the new legislation that was introduced, the conversations about employment categories shifted to discussions about proposed modifications to existing labor laws. More than ten different standards define the term “employee” among the states and the federal government.

The IFI, PPAI, and the IMA are all working to inform their members about the pending legislation and to encourage members to oppose the bill by emailing their elected representatives. PPAI has an efficient tool that provides an easy way to send an email to your representatives. Please use and share the link to PPAI’s Action Alerts for an easy way to voice your opposition to the legislation: https://advocacy.bgov.com/v2form.html?uuid=1007fd02-0e7f-4b5b-a6f9-bcc0a0439e75&cs-preview=true.  You can customize your message.

Federation Reaffirms Role to Develop Standards for Incentives, Rewards and Recognition

The Incentive Federation’s Board of Directors, during a December 2020 conference call, affirmed the value of industry standards for programs and procedures implemented for the incentive, rewards and recognition  industry. The Board also committed to begin work in 2021 to identify the most impactful standards that will bring value to industry companies.

Why are standards important?

Standards for this broad industry, when properly applied and executed, promise to help businesses deliver more powerful and effective solutions and programs for rewarding and recognizing excellent employee performance, increasing productivity, and ensuring customer retention and satisfaction.

The initiative acknowledges that standards developed and applied in thousands of industries worldwide, such as ISO 9000, have helped improve efficiency, productivity and quality in manufacturing and delivery of products and services. Only in the past few years has the concept of standards for quality management gained acceptance, and efforts are now being made to extend those principles to organizational engagement with employees and customers.

“If your company is committed to quality people management, like we are at Hinda,” commented IFI Chairman Mike Donnelly, president of Hinda Incentives, “I would strongly recommend that you investigate and learn about the exciting work that the Incentive Federation is leading with top industry professionals and association members regarding the creation of new ANSI Standards and Certification, and how you can use them to improve your processes and market your commitment to customers, talent, investors and more.”

Why has the Federation undertaken this role?

Since the IFI has served for many years as the umbrella group for the broad marketplace of incentives, recognition, rewards, promotional products, corporate gifts, awards, incentive travel, and motivation in areas such as research, legislative monitoring and public outreach, the Board decided that the IFI is a logical “home” for standards development.

The Incentive Federation was approved as a member of the American National Standards Institute (ANSI) in 2018 and will continue its membership in the organization throughout the standards approval and development process. In early 2020 the IFI was importantly approved by ANSI as an Accredited Standards Developer for the many sectors that encompass incentives, rewards and recognition.  

How can standards help our industry provide value and service?

Standards are:

  • Documents that provide a collection of measurable best practices, guidelines, customs, experiences, and practical solutions to guide organizations on a topic
  • Collaboratively and voluntarily developed through consensus
  • Regularly revisited and revised

Standards are not:

  • Regulations
  • Laws
  • Necessarily “how to implement” documents
  • Certifications
  • Individual organizational policies and practices

The benefits of creating standards for incentives, rewards and recognition are:

  1. Improves implementation of programs within organizations
  2. Permits “apples to apples” performance comparisons between programs and providers
  3. Reduces the cost of program start up, operations, and guides use of resources
  4. Further confirms incentives, rewards and recognition as a “profession” or discipline that helps businesses become more successful and profitable
  5. Establishes common terminology and metrics for an industry
  6. U.S. federal law requires federal regulators to defer to existing industry standards. An executive order also encourages federal agencies to use industry standards rather than make its own rules.

A very practical example that most industry practitioners are familiar with is the development and implementation of safety incentive programs. In past years, the Occupational Safety and Health Administration posed some very negative views about many safety incentive programs. It has taken years of dedicated advocacy to persuade OSHA that properly designed safety incentive programs can reduce job injuries and deaths, improve worker health and productivity and contribute positively to a company’s bottom line.

If industry standards had been in place in the early 2000s, it is likely that OSHA would have looked to our industry as a model and would have accepted the principles for the design and use of safety incentive programs. The same can be said for health and wellness programs and even for the I.R.S. guidelines that govern employee achievement awards and the tax preferences for which our that the industry has long lobbied.

How can industry companies and professionals participate?

The Federation needs the support of its members, both financial and intellectual, to ensure that the standards being developed represent the interests of the members and, most importantly, the interests and needs of the thousands of businesses employing incentive, recognition or rewards programs for customers and employees.

The IFI soon will begin recruiting U.S. industry experts to participate on standard development projects and assist in forming, crafting and developing standards for approval, and we intend to lean heavily on our IFI members who wish to participate.

IFI member organizations and corporate members are being asked to participate in the funding, review and development of the standards. Quite simply, the Federation needs more financial support. Companies that help support this initiative may participate directly in reviewing and crafting the language and direction of the standards as they are developed.

In the coming months, the Federation will be asking IFI members and other industry companies to pledge their support in 2021 and to offer their expertise in helping craft the standards documents.