The 60-day written comment period for a proposal by the New Jersey Department of Labor to drastically reduce the number of independent contractors in the state ends on Tuesday.
But comments made in public by the growing number of people opposing the controversial proposal promise to continue well afterward.
The past month has seen an onslaught of letters from influential New Jersey lawmakers from both sides of the aisle telling NJDOL to withdraw the rule, as well as comments from U.S. Senator Andy Kim (D-NJ) on the importance of gig workers maintaining flexibility and near daily criticism of the rule from callers on NJ101.5’s top-rated morning show with Eric Scott.
And that’s all on top of a NJDOL public hearing where overwhelming opposition was voiced to the rule, and the daily work put in by NJBIA’s Vice President of Government Affairs Elissa Frank and Fight for Freelancers’ Kim Kavin to challenge the legality of NJDOL’s move and make lawmakers aware of the economic devastation left in the wake of a similar law made in California in 2019.
But even with all that, the question still remains: Will NJDOL pull the plug on the proposal?
“We don’t know, but we know that it would be the prudent thing to do,” Frank said. “We saw similar legislation in 2019 fail, and the pushback from independent workers who will have their livelihoods and flexibility upended has only grown stronger, as has the opposition from the business community.
“This is not to say that misclassification doesn’t exist and shouldn’t be addressed. But rather than doing a complete overhaul of the ABC test to determine a gig worker versus an employee, we would encourage that the Department withdraw this extreme proposal and engage in a more transparent and evidence-driven process that supports both worker protections and economic freedoms.”
Rising Voices
In July, lawmakers from Districts 9 (R), 11 (D), 13 (R), 18 (D) and 24 (R) have all written to the state Department of Labor urging it to pull the proposal.
On Friday, the first day of August, Senator Angela McKnight (D-31) also added her voice opposing the proposal to NJDOL.
Additionally, Senators Gordon Johnson (D-37) and Andrew Zwicker (D-16), the chair and co-chair of the Senate Labor Committee, and Joseph Lagana (D-38), the chair of the Senate Commerce Committee, also wrote NJDOL a letter saying they were concerned the rule departs from the existing statute and case law controlling worker classification.
As of this writing, Senate President Nick Scutari and Assembly Leader Craig Coughlin have not weighed in publicly on the rule proposal.
In New Jersey’s gubernatorial race, Republican Jack Ciattarelli has publicly opposed the proposal. Democrat Mikie Sherrill has not stated her position on the proposal as of yet.
“We’re thankful for the awareness of our lawmakers, and their calls to action” Frank said. “The more they understand that these regulations do not merely ‘codify’ an existing law, as the Department claims, the better.
“The Department is restricting the very framework that has allowed thousands of New Jerseyans to earn a living on their own terms. It will unequivocally impede large numbers of their constituents, as well as the many businesses who use them as part of their business models.”
That thought was echoed by District 18 legislators Sen. Patrick Diegnan, Asm. Robert Karabinchak and Asm. Sterley Stanley on Thursday.
“Small businesses, which often depend on independent contractors to remain agile and efficient, could face restricted access to the talent they need. This ultimately could reduce job opportunities across the state,” they wrote.
Exemption Attention
One major concern among those fighting the NJDOL proposal is the idea of the agency not pulling the rule but attempting to push it through with multiple exemptions.
That concern is justified because California’s AB5 law from 2019, which NJDOL is mirroring for its own regulations, has exempted more than 100 categories of workers.
“California had to pass an entire clean-up bill and there are still lawsuits relating to those exemptions to this day,” Kavin said.
“The bottom line is, if you’ve got a law or a rule that requires exempting more than 100 professions, you have seriously flawed regulations,” Kavin added.
Kavin noted that after New Jersey failed to get its freelance-busting law through in 2019, entire bills were proactively written to shield real estate agents and golf caddies from any future threats.
Kavin, citing fellow freelance fighter Karen Anderson, also noted that many of the California exemptions come with caveats that make it difficult, if not impossible to take advantage of.
Kavin also said how determining the winners and losers in such an exemption sweepstakes could border on discrimination.
Case in point, California Assemblyman Tri Ta called for a U.S. Department of Justice investigation earlier this year with regards to manicurists.
That profession only received an exemption for several years in California, which is now expiring. In his claim, Ta said more than 82% of manicurists are Vietnamese American, and 85% are women.
Further, in federal testimony last month, Director of Independent Women’s Center for Economic Opportunity Patrice Onwuka said nearly half of the more than 70 million freelancers in the country are women.
“Flexible work through independent contracting is critical to women's labor force attachment,” Onwuka said.
Knowing the ABCs
Under New Jersey state law, businesses must use an “ABC test” to determine a gig worker versus an employee.
That means independent contractors are required to:
- Be free from control and direction by the business
- Do work outside of a firm’s “usual course of business” and “places of business."
- Be engaged in an independent and established “trade, occupation, profession or business.”
For a transportation network company under the NJDOL rule proposal, however, “the services performed by the driver are likely not outside of the transportation network company’s usual course of business.”
In other words, under Requirement B, drivers for a ride-sharing company, for example, would no longer fall under the definition of a freelance worker. That person then would be an employee.
That “employee” under the proposal would be subject to employment taxes and other requirements under their new “employer,” Frank said.
Also, under Prong B of the ABC rules, a drywall installation company engaging a drywall installer or a country club engaging a caddie to work on a golf course would be deemed not outside the putative employer’s usual scope of business.
So those example gig workers would also be defined as employees.
Additionally, under Prong C in the new proposal, a worker having multiple employers would not equate that individual as having an independently established trade or profession, nor would a license in a specific occupation.
The proposed regulations state also that paying someone by IRS Form 1099 versus an IRS Form W2 does not transform that individual into an independent contractor, Frank said.
