Capitol Report

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December 9, 2019
Controversial employment status bill passes despite widespread opposition 

A bill described as codifying into law existing regulations to protect the rights of workers against misclassification was passed over several objections in the Senate Labor Committee last week. The controversial bill heads to another round of hearings and a full vote in a condensed lame duck rally before the end of a two-year session. 

S-4204 (Sweeney)/A-5936 (Egan) was introduced to protect workers’ rights and misclassification, said Senate President Stephen Sweeney in a press release. It amends the existing test to determine whether a person is an employee or an independent contractor during an unemployment compensation or wage and hour claim. The ABC test, as it is called, requires that an individual meet all three prongs of the test in order to be considered an independent contractor; otherwise, the person is classified as an employee. 

The bill is supported by labor unions to end what they consider the misuse of independent contractors to avoid affording individuals protections and requiring the employer to pay employment taxes. Strong opposition from a cadre of organizations spearheaded by the New Jersey Civil Justice Institute and the New Jersey Business and Industry Association argue the bill unfairly misclassifies a growing number of “gig economy” workers who choose the flexibility of independent contractor status to meet their life-work balance needs. 

The New Jersey State Bar Association (NJSBA) raised concerns over the bill’s expansive view of employees that would significantly impact not just practitioners, but all fields that utilize per diem or contract employees. For solo or small firms, independent contractors are core to their business model, members of the NJSBA Solo and Small Firm Section said. The flexibility of hiring an attorney or even support staff, such as paralegals or marketing specialists, is more affordable than bringing on part-time or full-time staff for which there is not enough work. The NJSBA’s members also voiced concerns about the broad expansion of the bill, which they believe would impact a large swath of individuals who are independent contractors, but would not technically meet the definition as amended in the bill. As a result, it would preclude individuals from engaging in certain types of work because of an employer’s unwillingness or financial inability to retain that person as an employee. 

Proponents of the bill say this is simply a codification of case law that analyzes the ABC test. Labor and employment practitioners point out that the analysis is fact sensitive and unable to be broadly applied. California enacted similar legislation in an attempt to classify Uber and Lyft drivers as employees rather than employees. The California bill—which takes effect in January—contains a number of carve-outs for occupations such as doctors, architects, financial advisors and fine artists. New Jersey’s proposed bill exempts only certified public accountants. 

The bill has the backing of Governor Phil Murphy, who announced a report on employee misclassification from the Task Force on Employee Misclassification. The report outlined recommendations to expand interagency cooperation through coordinated enforcement, data sharing and cooperation with neighboring states.   

This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters.