PIA Opposes Narrowing “Independent Contractor” Definition for Unemployment Insurance

PIA is raising concerns about the draft legislative text of the Unemployment Insurance Modernization Act, which is being championed by Senator Ron Wyden (D-OR), Chairman of the Senate Finance Committee, and addresses unemployment insurance reform. Specifically, the discussion draft would require states to use the “ABC test” to determine whether a worker is considered an independent contractor or an employee; only employees would be eligible for unemployment compensation. PIA recently signed on to an industry letter raising concerns with the draft bill’s use of the ABC test.

If the Wyden proposal becomes law, the ABC test would replace the longstanding “economic realities” test for identifying employees eligible for unemployment compensation. The economic realities test considers many factors and has been relied upon for decades by employers, courts, and the Department of Labor (DOL). The ABC test, by contrast, would essentially create a presumption that all services performed by someone for pay constitute “employment,” unless the employer can satisfy all three elements of the ABC test.

Using the ABC test, insurance agents who are independent contractors could be forced into “employee” status by virtue of their contractual relationship with the carriers they work with and their supervision by their carrier partners. That supervision would mean that, according to the ABC test, such agents are not “free” and would be considered employees of the carriers with which they contract. The ABC test would not account for the fact that carrier supervision is required by state and federal law. Independent agents are already well-regulated; this change would upend the employment classification of independent agents and, by imposing federal law on our state-based insurance regulatory system, threaten the very existence of that system.

In addition to raising concerns with the draft text of the Unemployment Insurance Modernization Act, PIA has also recently expressed its opposition to another bill that would use the ABC test: the Protecting the Right to Organize (PRO) Act. That legislation passed the House earlier this year but has since stalled in the Senate.

PIA will continue to oppose any legislation that would substantially narrow the definition of independent contractors to the detriment of independent insurance agents.