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Details, concerns emerge with roll-out of freelancer unemployment guidelines (updated)

The state’s labor department on Tuesday rolled out another set of highly anticipated guidelines for how freelancers, independent contractors and anyone self-employed can apply for unemployment benefits.

As of Tuesday afternoon, the state was handling a record number of more than 576,000 jobless claims from the past three weeks, according to Gov. Phil Murphy – and 16 million Americans nationwide – as the COVID-19 outbreak forces governments to shutter businesses in a bid to stop the virus’s spread.

That has led to an overburdened unemployment system, hounded by antiquated technology and unprecedented demand.

“[Y]ou won’t lose one penny of support,” Murphy assured at a press conference in Trenton on April 4.

Under the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act, which U.S. President Donald Trump signed on March 27, freelancers are eligible for unemployment benefits through the federal Pandemic Unemployment Assistance program. They are also eligible for federal tax credits under the Families First Coronavirus Response Act, which went into effect on April 1.

There are as many as 57 million independent contractors nationwide, according to an October 2019 report from the Freelancers Union and the digital platform Upwork.

Benefits are 60 percent of their take-home pay for 39 weeks, capped at $713 a week and retroactive to any unemployment that began on Feb. 2. Benefits eligibility extends to anyone earning at least $231 a week. Freelancers would also be eligible for the additional $600 of unemployment benefits a week, retroactive to the week ending on April 4, and lasting through July 25.

New Jersey was one of just 29 states able to pay out the $600 extra a week, U.S. Labor Secretary Eugene Scalia told reporters at an April 15 phone press conference.

“How long that takes will vary by state,” Scalia said during a press call. “Some states will take longer because they rely on computer equipment that is 40 years old and in need of significant IT support.”

“NJDOL is working with the U.S. Department of Labor to develop the process to assess your application for this new federal program of Pandemic Unemployment Assistance,” reads the labor department guidelines “In the meantime, applying for unemployment insurance is the necessary first step.”

Anyone who’s already filed for unemployment would still be processed through the old system.

“We have asked those workers to apply online for unemployment,” Angela Deli-Santi, a spokesperson for New Jersey Department of Labor said of freelancers earlier this month. “They will almost certainly be denied, but that denial of eligibility for traditional unemployment is a necessary prerequisite for eligibility for the special unemployment compensation due to COVID-19.”

But, federal labor officials disputed whether that was actually a necessary requirement.

“We did learn that some states are saying to independent contractors you have to first get rejected for unemployment, then you can come apply for this other benefit,” said one U.S. labor official. “We explicitly told the states that they should not require that futile initial step.”

As for the federal tax credits, the FFCRA requires employers to provide 10 weeks of paid family leave and two weeks unpaid for workers to care for their children whose schools or daycares are closed because of the pandemic. The federal stimulus also provides refundable tax credits to businesses to cover the costs of paid family leave, as well as two weeks of sick leave for workers who are self-quarantining, that have tested positive for COVID-19, or are showing symptoms of the virus.

Freelance workers would be eligible for those tax credits, which would be applicable for any paid leave given during 2020, but details are still being hashed out for how business owners can obtain them.

How to apply

In the unemployment application, a freelancer would add a list of anyone they’ve done work for in the past 18 months—anyone who is self-employed would add their own name in the ’employer name’ field.

As to the “reason for separation,” an applicant could indicate that their clients closed their business or stopped using their freelance services because of the COVID-19 outbreak; that they had to reduce the services they offer or cut them entirely because of the outbreak; or any other COVID-19-related reason, such as contracting the virus or self-quarantining, or caring for a family member in that situation.

The state labor department said it would use the unemployment application to gauge whether a freelancer was improperly classified as such, when they were in actuality a company employee.

Freelancers and “gig or platform workers” would enter the name of the “business/platform/app” where they did that job.

“You would be considered an employee if that business controls/directs your work; and your work is part of the usual course of business or is within the places of business of that entity for which your service is performed; and if you are not engaged in an independently established trade, occupation, profession or business,” the sample application form reads.

This has become a point of contention in the past between the Murphy administration and legislative leadership on one hand, and business groups and freelancer advocates on the other hand.

Debbie Abrams Kaplan, a freelance writer and representative for one such group, Fight for Freelancers, said that “some independent contractors are wary about filing for the federal aid they’re entitled to” because of this particular caveat.

“Independent contractors are worried that the department will audit their clients, and as a result, the clients will decide to no longer use independent contractors because they don’t want the risk – even if they’re on solid ground. It’s too expensive to fight the department,” she added. “Adding a step that encourages audits has nothing to do with getting that aid into the hands of [independent contractors] who need it.”

Between November and January, lawmakers tried to push through a bill that would reclassify tens of thousands of freelancers within New Jersey as regular employees, so that companies such as Uber and Lyft would be responsible for payroll taxes and worker benefits.

That met intense resistance from business groups, and lawmakers in turn scaled back the legislation to codify into law the Murphy administration’s existing use of the “ABC test” separating employees from freelancers. In November, the labor department used that interpretation to levy a $640 million fine against Uber for improperly misclassifying their drivers as freelance workers.

The administration and legislators in New Jersey have also pushed forward several bills ramping up penalties for employee-misclassification.

Editor’s note: This story was updated at 8:19 a.m. EST on April 17, 2020 to include comments from U.S. Labor Secretary Eugene Scalia, and comments from another U.S. Labor official pertaining to the unemployment application process for freelancers.

Daniel J. Munoz
Daniel Munoz covers politics and state government for NJBIZ. You can contact him at dmunoz@njbiz.com.

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