The Senate on Thursday voted to approve legislation that would exempt certain licensed and regulated professionals from the state's new independent contractor rule, after several lawmakers spoke out on the Senate floor to say broader refroms are still needed.
The Department of Labor & Workforce Development (NJDOL) recently adopted regulations that are intended to prevent worker misclassification but also make it more difficult to be an independent contractor in New Jersey. The rule, strongly opposed by NJBIA, has been paused until Oct. 1 to give NJDOL and lawmakers time to work out any needed statutory changes.
The bill before the Senate, S-2782, sponsored by Sen. Gordon Johnson (D-37) and Sen. Paul Sarlo (D-36), clarifies that certain licensed or regulated professionals – such as insurance providers, broker-dealer agents, investment advisors and others – may be treated as independent contractors if they operate under a written agreement describing them as such.
Senators Holly Schepiesi (R-39) and Michael Testa (R-1) said on the Senate floor that the bill picked "winners and losers" among independent contractors and that further reforms were needed. NJBIA also has been pushing for the underlying framework of the NJDOL rules to be addressed. After the Senate vote, NJBIA Policy Analyst Jack Kelly noted that there is a short window before the NJDOL rules take effect on Oct. 1 and that broader reforms need to move parallel with bills providing carve-outs to various independent contractor groups.
"This bill, S-2782, acknowledges that the existing framework adopted by NJDOL can inadvertently impact professionals who have traditionally operated as independent contractors and can create situations where an individual may be classified as an independent contractor under one statute but an employee under another,” Kelly said.
“NJBIA supports this legislation because it represents a meaningful step toward addressing concerns with New Jersey's current worker classification framework, however, more comprehensive reforms are critically necessary,” Kelly said. “We hope this legislation providing greater certainty for some affected professions also advances a broader conversation about the need to modernize New Jersey’s workforce classification laws.”
Kelly pointed out that after California’s independent contractor law with a strict “ABC” test took effect in 2020, lawmakers there found themselves repeatedly revisiting worker-classification policy and having to pass exemptions.
Over time, California enacted more than 100 occupational exemptions and alternative classification standards covering insurance professionals, securities professionals, physicians, accountants, architects, engineers, real estate professionals, writers, musicians, photographers, construction subcontractors, and many others, Kelly said.
“California's experience suggests that addressing classification concerns one industry at a time can become an ongoing exercise as additional professions seek similar treatment,” Kelly said in his June 4 testimony to the Senate Budget & Appropriations Committee. “As policymakers consider S-2782, we encourage the Legislature to also evaluate whether broader reform of New Jersey's ABC framework would provide a more durable solution than continuing down a carveout-by-carveout path.”
