Independent consultants are small businesses — sectoral bargaining could wipe us out
Each election cycle politicians at every level claim that they are a small business candidate — that they will support policies to help small business owners grow and flourish. However, right now, lawmakers at the state and federal levels continue to propose policies that would absolutely devastate the ability of independent consultants to make a living as self-employed professionals.
I have made independent consulting my career for nearly 20 years, so I could make good money while having a flexible schedule, especially when my daughter was young. I started as an independent consultant for Fortune 500 companies, then formed my first company to represent other solo consultants, and then later created a first-of-its-kind trade association for self-employed professionals, the Professional Independent Consultants of America. For me and countless other professionals and solopreneurs, it’s important that we are hired and paid on a business-to-business 1099 tax basis as independent contractors, not on a W-2 tax basis as temporary employees. Our informal motto is “Friends don’t let friends W-2TM” because we want to minimize our tax burden while saving more for our retirement. But policies like the PRO Act and sectoral bargaining threaten our ability to run our own businesses.
The PRO Act has garnered criticism from both the left and the right as it introduces a dangerously narrow standard for determining the difference between an independent contractor and an employee — commonly known as the “ABC Test.” This test has been a hot-bed of controversy in California since the passing of AB-5 because it makes it extremely difficult for people to qualify as an independent contractor.
But other potentially devastating policies that would be enacted under a sectoral bargaining scheme have flown under the radar and it’s time for people to take notice.
The main idea behind sectoral bargaining is that workers in one sector or region have their work terms established through a collective bargaining process, even though they have different employers and job sites. While well-meaning, aiming to increase wages and benefits for workers like Uber and Lyft drivers, these policies would set a dangerous precedent for independent contractors, curtailing our right to make a living as small or micro businesses.
Most politicians don’t realize that the term “independent contractor” covers a wildly diverse set of workers, from rideshare drivers and “taskers” on one end, to highly skilled consultants and motivational speakers on the other. Legislation that attempts to lump us together with a one-size-fits-all “solution” is likely to do more harm than good. For independent consultants and other solopreneurs, our success relies on our ability to negotiate our own rates and contracts on a business-to-business basis. But under a sectoral bargaining process, we could end up being forced into union agreements without our consent. In legislation introduced in New York, union representatives only need 10 percent of workers in a sector to vote in favor of unionization, leaving the other 90 percent ignored. Industry negotiations would be based on market share, meaning large corporate actors would have much more negotiating power than smaller companies, and self-employed professionals would likely not be represented at all.
For independent consultants, this type of regulation could be disastrous. We choose to be self-employed because we can set our own hours and do the work we love while having unlimited upside to our earning potential. Sectoral bargaining could upend all this by applying baseline wages and salaries across entire industries, limiting our ability to increase our prices or work on a business-to-business basis. Not only is it bad for us, it’s also bad for traditional businesses as well. The “war for talent” is hotter than ever, and sectoral bargaining would all but remove competition between businesses to attract and retain good talent. Worst of all, it strips professionals of choice, forcing us to be represented by a union that likely does not understand our interests, and governed by regulations that we neither need nor want.
Sectoral bargaining threatens to dismantle the exact qualities that make independent contracting so attractive to professionals — flexibility, high income, business owner tax deductions, and better retirement saving. This should concern our lawmakers, especially as the business community remains fragile. If politicians are truly dedicated to protecting small businesses as our economy recovers from the COVID-19 pandemic, they wouldn’t look to enact policies that hamstring our ability to make a living.
Liz Steblay is the founder of the Professional Independent Consultants of America (PICA). and the founder and CEO of ProKo Agency, a modern talent model that matches Fortune 500 HR executives with professional HR consultants.