Gov. Phil Murphy signed a package of six bills Monday afternoon aimed at curtailing worker misclassification—a practice where businesses illegally misclassify workers as freelancers in order to skimp out on taxes and other worker protections.
The measures still lacked Senate Bill 4204, which could have reclassified tens of thousands of independent contractors as regular employees. Its sponsor, Senate President Stephen Sweeney, D-3rd District, pulled the measure earlier this month after it met intense opposition from business groups and freelance workers worried about the impact, such as photographers, writers, musicians and truck drivers.
Sweeney reintroduced the measure on Jan. 14, now called Senate Bill 863, which would codify into law the Murphy administration’s interpretation of the “ABC test” separating employees from independent contractors.
A task force that Murphy convened to gauge how the state can clamp down on worker misclassification reported that the state misses out on tens of millions of dollars in not-paid employment taxes because workers are misclassified.
“It hurts employees and their families who do not have access to critical benefits and protections they are entitled to by law, including minimum wage, overtime compensation, family and medical leave and unemployment insurance,” reads a joint statement from several sponsors of the Assembly version of the measure. “It also hurts each of the taxpayers and businesses paying their fair share while others avoid their tax duties.”
And the practice has increased by upward of 40 percent in the past decade, according to the task force.
“These bills protect employees who are misclassified as independent contractors as well as independent contractors improperly treated as employees, and provide critical support for employers who play by the rules,” Labor Commissioner Robert Asaro-Angelo said Monday in a statement.
One measure, Assembly Bill 5838, would let the state labor department issue a “stop-work order” against businesses that have been found violating the state’s wage and hour laws by misclassifying workers.
Assembly Bill 5839 calls for fines against employers who misclassified workers, while Assembly 5840 would make both the employer and any labor contractor they use jointly responsible for worker classification, and any penalties and taxes owed if workers are not properly classified as employees.
Another measure, Senate Bill 4226, lets the state’s labor department name and shame employers that violated the state’s wage and hour laws, by posting their information online.l