Courts in California may have blocked the state’s new independent contractor from being applied to truckers, but New Jersey is forging ahead with its own version and already has enacted other laws making it more risky to use contractors in that state.
In California, the federal district judge who earlier handed down a temporary stay, turned it into a preliminary injunction that will remain in place while the case is being heard (AA, 1-15-20, P. 2).
The federal judge, like a state judge did earlier, said the plaintiff California Trucking Association was likely to prevail in its argument that the state law violates established federal law. The injunction means that the new state law does not cover truckers, although since Jan. 1 it applies to all of the other job categories listed in it.
In addition, the California Supreme Court agreed to revisit the issue of retroactivity for its decision that independent contractors must meet the same stringent requirements. It was the high court’s 2018 decision that the state legislature later codified into the law currently under challenge in other courts.
Among those seeking to overturn the new law are freelance writers and photographers; the ride share and delivery companies Uber, Lyft and DoorDash; and American Trucking Associations.
Proposed legislation in New Jersey similar to California’s draconian ban on most kinds of independent contractors is being deliberated, but while that is happening, the state legislature adopted a package of new laws making it more risky and expensive to use contractors.
On Jan. 20, Governor Phil Murphy signed the laws which require those who hire contractors to pay payroll taxes and impose other new requirements.
The new laws prohibit employers from intentionally misclassifying employees, require employers to post notices describing misclassification, and allow stop- work orders to be issued against employers found to be violating state wage, benefit and tax laws.
One of the new laws allows the New Jersey Department of Treasury to share tax information with the state’s Labor and Workforce Development agency. Another of the laws holds labor contractors and employers in the state are equally liable for evading tax laws.
The five new laws are intended to address misclassification of independent contractors by greatly increasing the state’s ability to enforce wage/hour and tax laws.
The new laws also broaden private rights of action under New Jersey’s wage and hour laws, and create joint and personal liability for contractors’ violations of tax and benefit laws, report attorneys Salvador Simao and David Kim of the Ford & Harrison law firm.
Soon after being sworn in, NJ Gov. Phil Murphy created a task force to end misclassification of independent contractors, and the state’s Department of Labor and Workforce Development began increasing audits and scrutiny of contractors.
The current draft of the contractor ban that is being debated by the New Jersey State Senate largely adopts California’s three-pronged “ABC” test to determine whether a worker should be classified as an independent contractor or as an employee.
or “B” – prong holding that to be considered a contractor, the individual cannot work out of the same business location as the contracting entity.
However, the California law rewrote the second prong to state that the contractor cannot work in the same line of business as the contracting entity. This would make it impossible for an independent truck driver to lease to another trucking company.
New Jersey’s legislation “B” prong currently states that services performed by contractors must be “either outside the usual course of the business for which that service is performed, or the work is performed outside of all the places of business of the enterprise for which the service is performed.”
Most other states using an ABC test have a second – or “B” – prong holding that to be considered a contractor, the individual cannot work out of the same business location as the contracting entity.
However, the California law rewrote the second prong to state that the contractor cannot work in the same line of business as the contracting entity. This would make it impossible for an independent truck
driver to lease to another trucking company.
New Jersey’s legislation “B” prong currently states that services performed by contractors must be “either outside the usual course of the business for which that service is performed, or the work is performed outside of all the places of business of the enterprise for which the service is performed.”
