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

Independent Contractor Status for Thousands Threatened by New Federal Legislation

As reported recently by PPAI, the organization and the promotional products industry are pushing back against a bill in Congress that would effectively ban independent contractor classifications under federal labor law. PPAI has also joined with several industry coalitions, such as Coalition for a Democratic Workforce, representing hundreds of trade organizations, to oppose the legislation.

The Protecting the Right to Organize (PRO) Act, H.R. 842, amends the National Labor Relations Act to establish a new definition of employees 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. PPAI is opposed to the PRO Act because, if signed into law, it would significantly change how thousands of promotional products companies interact with each other, and it will eliminate jobs in the industry.

Specifically, the PRO Act would abolish independent contractor agreements, enforce government control over private employment contracts and significantly broaden risk exposure to joint employer liability.

The legislation also sets new criteria for determining occupational status as an independent contractor instead of an employee. The proposed new criteria entail a three-pronged test for which each of the requirements must be proven if an independent contractor wants to retain his or her status under federal labor law.

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.

  1. The first element of the employment test requires the worker to be free from the control of the hiring organization. This condition must exist in the text of the contract as well as in the practice of the contractor’s work.
  2. The second element of the test requires the work being performed to be outside the normal course of business for the hiring organization. This perhaps the most challenging of the new “test.”
  3. The third element of the test is a requirement for the contractor to be involved in an occupation or trade that is independently established and the same type of work that is being performed for the hiring entity. This test makes the presumption that a worker is an employee unless all the elements are demonstrated by the hiring organization.

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 House is expected to consider H.R. 842 during the week of March 8, with a possible vote happening by the end of the week. Passage in the U.S. Senate is less certain.

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.