June 14, 2021 at 5:00 am ET
Entrepreneurship is ingrained into America’s identity, and entrepreneurs are the most resilient people you’ll ever meet. I’m privileged to see that firsthand every day, as the CEO of Entrepreneur Media, where I watched entrepreneurs and small business owners across America do everything they could to survive during this pandemic. It’s why I’m so dismayed that, just as businesses are getting back on their feet, lawmakers in Washington are trying to pass the Protecting the Right to Organize Act — a law that would cost people their income, livelihoods and small businesses, and it would devastate entrepreneurial investment, especially among women, minorities and veterans.
Too few entrepreneurs are aware of this law, which is why I’m speaking up against it. This community may have weathered a pandemic, but it doesn’t deserve the self-inflicted harm now threatened by Washington.
The PRO Act would drastically restructure our nation’s labor laws in favor of union bosses and at the expense of small businesses. Included in the PRO Act is the now infamous “ABC” test, which voters in California overwhelmingly rejected for app-based drivers, and which the California Legislature has seen cause so many issues in other professions that it has now had to add exemptions for more than 100 types of careers to its ABC Test law. The ABC test presumes employment unless a certain set of conditions are met. This structure advances organized labor’s goal of widening the eligible pool of union employees as much as possible, by making it legal to unionize independent contractors, which would have the very real, damaging effect of restricting independent and flexible work arrangements.
Laws like these have real consequences, and we’ve already seen them. Recent census data shows that people are fleeing California, where lawmakers have previously passed some of the elements of the PRO Act, and in turn created an economic environment that makes it difficult to make a living as an entrepreneur or independent contractor. We shouldn’t expand California’s failed economic policies to the rest of the United States.
This restriction of independent work would also hurt the small businesses and startups that rely on independent contractors for their workforce. In a survey conducted by Alignable, an online network of more than 6 million small-business owners, 7 out of 10 surveyed respondents said that the PRO Act’s restriction of independent work would cause them to either shut down for good or hire fewer workers. The same survey found that most independent contractors would anticipate losing 76 percent or more of their business if the PRO Act became law. These businesses are already struggling to stay afloat, and the PRO Act would “substantially unravel” parts of our nation’s economy.
America’s 750,000 franchise owners would also be upended by the PRO Act. Franchising is a brilliant and thriving business concept: A brand such as McDonald’s can create a winning formula, and then other business owners can purchase one or multiple units from McDonald’s and operate them independently. Under the PRO Act, however, these independent owners would likely be classified as employees of their parent brand — turning these small-business owners into middle-managers. Worse yet, the PRO Act would enshrine a confusing and disastrous relationship called “joint employer,” which would make independent franchise owners and their parent companies both jointly responsible for a single franchise’s employees.
What will be the result of this? If corporate brands are deemed responsible for employment decisions at the unit level, franchising becomes less attractive in favor of the corporate, big box retailer model. This means more corporate control over independent owners’ decisions, and diminished franchise opportunities for new entrepreneurs. Because 30.8 percent of franchises are owned by minorities, we can expect that this business model will severely impact underserved communities — hardly President Joe Biden’s claim to “Build Back Better.” The joint employer provision alone could cost $17.2 to $33.3 billion in lost annual output from franchise owners.
There are other aspects of this bill that also give me pause, but the effects on our nation’s entrepreneurs alone should be enough to stop lawmakers from pursuing it.
I will never question the will and resourcefulness of entrepreneurs — but in this fragile economic environment, we all should be asking how the United States can help small businesses and entrepreneurs survive, not how this country can impose additional barriers to their success. To create a better economic environment for people who are willing to bet on themselves, lawmakers should oppose the PRO Act.
Ryan Shea is CEO of Entrepreneur Media Inc., the parent company of Entrepreneur.com and Entrepreneur Magazine.
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