Truck drivers in New Jersey brace for potential alterations in the state's law regarding independent contractors
New Jersey Proposes Stricter ABC Test for Independent Contractors, Mirroring California's Approach
New Jersey is moving towards adopting a more stringent ABC test for classifying independent contractors, following a similar path to California's AB5 (ABC5) test. This development, spearheaded by the New Jersey Department of Labor (NJDOL), could have significant implications for the state's labor market, particularly for freelancers and gig economy workers.
The proposed New Jersey ABC test requires all three prongs to be satisfied for a worker to qualify as an independent contractor. These prongs include:
- The employer does not control how the worker performs their duties.
- The work performed is outside the employer’s usual business or location.
- The worker is engaged in an independently established trade or business, which is more than just holding a business license or servicing a few clients.
This rule emphasizes a narrow interpretation of these criteria, codifying court decisions such as Carpet Remnant Warehouse, Inc. v. New Jersey Department of Labor and East Bay Drywall. The aim is to ensure consistency and clarity in enforcement.
Critics, including business groups and some lawmakers, argue that the stricter standard could reduce flexible work opportunities, potentially leading to fewer jobs and reduced economic participation options for workers who prefer independent contracting arrangements. Concerns about overreach and economic harm persist, with Democrat Sen. Angela McKnight raising concerns about the possible impact on New Jersey's ports.
Unlike California, where the changes were passed by the legislature, New Jersey’s approach is rulemaking-based through its labor department. This means that the Department of Labor can implement the changes without any further approval needed. However, the legislature "does have the power to put forth any number of pieces of legislation to try and reverse this," according to Lisa Yakomin, the President of the Association of Bi-State Motor Carriers.
The public comment period for the proposed rule changes ended last week, and comments submitted to the NJDOL are not yet available online. As the situation develops, it remains to be seen how New Jersey's labor market will adapt to these proposed changes and whether they will mirror the whipsaw changes in regulation similar to the federal IC rule under the Wage and Hour division of the Department of Labor, as seen in California.
References:
- NJ.com
- Forbes
- Bloomberg Law
- Law360
- Associated Press
- The stricter ABC test in New Jersey's proposed rule could have implications for multiple industries, as finance, politics, and general news outlets scrutinize the potential effects on the state's business landscape.
- Industry observers, such as the Association of Bi-State Motor Carriers, warn that the increased standard for independent contractors could impact the supply chain in New Jersey, potentially reducing flexibility in the industry.
- Given the importance of the ports in New Jersey, concerns about the proposed changes extend beyond the state's labor market to the wider economy, with possible ramifications for finance, industry, and general news.
