Bill could reclassify thousands of NJ’s independent contractors

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A new bill could classify thousands of New Jersey independent contractors, freelance and gig economy workers as employees – a measure that could profoundly impact businesses that rely on such workers, including Uber Technologies Inc., DoorDash Inc. and Lyft Inc.

The proposal, sponsored by Senate President Stephen Sweeney, D-3rd District, has aspects of a recently signed measure in California – Assembly Bill 5 – which goes into effect on Jan. 1 and limits when companies can classify their workers as independent contractors.

In New Jersey, independent contractors are not typically afforded the same rights as employees, such as wage and hour protections, paid sick leave and unemployment benefits. That has tempted many businesses to illegally misclassify their workers as independent contractors, a practice which the Murphy administration has begun cracking down on.

The bill, which was introduced morning of Nov. 8 and scheduled for a Nov. 14 vote in the Senate Labor Committee, would tweak two of the three prongs in the “ABC test,” which is used to separate employees from independent contractors.

The “A” prong of the test is whether the worker would be free from any direction or control from the company. Under the “B” part, work has to fall outside a company’s “usual course of business,” and under “C,” the worker has to be engaged in their own established and separate business.

With A5 in California, Uber argued its workers would not be considered employees under the law, because the work of their drivers, which ostensibly makes up the lion’s share of services they provide, still falls out of their “usual course of business,” which according to Uber Chief Legal Officer Tony West is “serving as a technology platform for several different types of digital marketplaces.”

But Sweeney’s proposal – Senate Bill 4204 – works around Uber’s argument by altering the B prong and stipulating that workers could not be exempt from employee status “solely because the service is performed outside of all the places of business of the enterprise for which the service is performed.”

S4204 also modifies the C prong, so that even if the worker performs a job for a company and runs their own business endeavor, they could only be exempt from employment status in the event that the work they do for the company is “of the same nature” as the work they perform in their independent venture.

That particular change could address an unintended consequence playing out with California’s A5, which drastically cuts down on how much work freelance journalists can do for media outlets.

Because employers in California can only contract work “outside the usual course of business,” and a freelance journalist’s work makes up the bulk of that employer’s business, they could no longer be independent contractors under the new law.

Representatives for Uber and DoorDash did not immediately return requests for comment.

“[Ninety-four percent] of New Jersey Lyft drivers drive less than 20 hours a week and use driving as a way to supplement their income,” a representative for the company said in a statement to NJBIZ. “Flexible schedules are extremely important to them, and many turn to driving because a traditional job simply doesn’t fit their needs.”

“An employment model would put their flexibility and financial security, as well as the affordability and accessibility our riders depend on, into jeopardy for the benefit of a select few,” Lyft added.

New Jersey labor officials are reportedly investigating both Uber and Lyft to determine whether both companies are wrongly classifying drivers as independent contractors, and should have to pay employment taxes on the money those drivers earn, according to an October report from Bloomberg Law.