New Jersey’s top Senate Democrat is proposing a change to a controversial bill reclassifying freelance-workers that would effectively scale back how many people would qualify as employees.
The original version of S4204 stipulates 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.” But proposed amendments, sent out Friday evening, restore that “B” function of the ABC test – used to differentiate gig workers from employees – so that workers doing their job outside of the employer’s place of business could still qualify as independent contractors.
The original changes to the “B” portion of the test were crafted in a way that it would apply to companies such as DoorDash Inc., Uber Technologies Inc. and Lyft Inc. — with the latter two opposing the measure.
The language would bypass Uber’s arguments that their drivers would not be considered employees, because their services fall outside of the company’s “usual course of business,” which it used to argue exemption from a similar measure, California’s Assembly Bill 5.
Bloomberg Law reported on Nov. 14 that state labor officials told Uber, and its subsidiary Raiser LLC, they owe the state $523 million in employment taxes for workers who were wrongly misclassified as independent contractors over the past four years — on top of $119 million from interest and penalties.
The measure has been met with considerable opposition from business executives and industry heads.
They argue that the boom of the so-called “gig economy” in recent years has allowed for upward economic mobility for thousands of state residents, by affording them otherwise non-existent, additional income sources.
“For many people, this legislation will deprive them of an important choice in how they work, eliminate income-earning opportunities, and make it even harder to survive in New Jersey,” Senate Minority Leader Thomas Kean Jr., R-21st District, said in a Nov. 22 statement.
But advocates, including Senate President Stephen Sweeney, D-3rd District, argue that the measure is necessary to prevent employers from exploiting workers by improperly classifying them as freelance workers rather than employees.
Businesses are able to skip out on millions of dollars each year in employment taxes by doing so, and under state law freelance workers are not afforded the same rights as employees.
During the Senate Labor Committee hearing on Nov. 14, where lawmakers passed the measure in a 3-1 vote, business advocates and industry executives reliant on large pools of freelance workers, all testified how their ways of doing business could be thrown into chaos if thousands of workers are suddenly classified as employees.
The American Society of Journalists and Authors said it had concerns with the New Jersey bill, following revelations of an unintended consequence playing out in California that 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 would no longer be independent contractors under the new law.
But S4204 tweaks the “C” prong of the ABC test, so that even if someone does work for a company and runs their own endeavor as an independent contractor, 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 own ventures.
The Friday proposals do not appear to make any changes to this portion of the bill. S4204 would also leave the “A” prong of the test unchanged, which requires that workers be free from any direction or control from the company to be considered freelance.
Sweeney assured that more changes to the bill are forthcoming.
Some changes already approved call for heavily regulated professions such as realtors, accountants and insurance brokers to be exempt from the legislation in its entirety.
“We want to put into law the current regulations to ensure their future viability,” the senate president added. “The amendments to the bill will continue to ensure the ability of legitimate independent contractors to pursue their work at the same time they safeguard against misclassification.”