The New Jersey Department of Labor and Workforce Development has proposed a new rule that would reclassify many gig workers, such as rideshare drivers and freelance writers, as regular company employees. This move aims to provide protections to independent contractors, but it has raised concerns among some business groups.
Elissa Frank, Vice President of Government Affairs at the New Jersey Business & Industry Association (NJBIA), expressed apprehension about the proposal. "The main takeaway is that under the proposal it will be extremely difficult to be considered an independent contractor in New Jersey," she stated. Frank argues that the rule could harm freelancers' autonomy and increase labor costs for businesses. She added, "It will also likely add to increased prices in an already unaffordable state and less service for customers."
Under current New Jersey law, businesses must apply an "ABC test" to differentiate between gig workers and employees. This test requires independent contractors to be free from business control, perform work outside the firm's usual course of business, and engage in an established trade or profession independently.
According to the proposed rule, transportation network company drivers would not meet these criteria and thus would be classified as employees. Frank noted that this change would subject these individuals to employment taxes and other requirements under their new employer status.
Frank further explained that paying someone via IRS Form 1099 does not automatically classify them as an independent contractor under the proposed regulations.
In recent years, the Murphy administration has taken steps against worker misclassification practices. In 2022, Uber settled a $100 million case without admitting its drivers were employees. The state is also suing Lyft for $17 million over similar issues.
Robert Asaro-Angelo, Commissioner of the Department of Labor, emphasized New Jersey's commitment to workplace justice: “The work being done in New Jersey to combat worker misclassification is a testament to our state’s commitment to justice and fairness in the workplace.”
Frank suggested that NJDOLWD is pursuing this regulatory change because previous legislative efforts stalled in 2019. She argued that the bill doesn't align with modern work preferences for those who choose gig work on their terms.
She advised all businesses using independent contractors to ensure compliance with classification requirements due to potential audits by the Department of Labor. Frank recommended legal counsel for businesses navigating these rules: “Especially in this climate, it’s important for businesses to be up-to-speed on the classification of workers to best avoid penalties.”
