Dive Brief:
- New Jersey Gov. Phil Murphy signed into law July 8 a series of legislation designed to address misclassification of workers in the state, according to a press release.
- One of the laws, A5890, provides additional enforcement options to the state's commissioner of labor and workforce development, while another, A5892, makes it illegal for New Jersey employers to misclassify employees for the purpose of evading payment of insurance premiums.
- Two additional laws also touch on enforcement issues. A5891 creates an Office of Strategic Enforcement and Compliance with the state labor and workforce development department, and A1171 requires the commissioner to create a statewide database of the written payroll-related statements that contractors and subcontractors performing public work in New Jersey are required to file.
Dive Insight:
Worker classification laws continue to be a point of emphasis for lawmakers in a handful of states and at the federal level, where this year's change in presidential administrations led to a reversal in approach.
New Jersey law presumes that an individual who performs a service and is paid to be an employee unless that individual's employer can prove each of the following three conditions:
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The employee has been and will continue to be free from control or direction over performance of the service, both under a contract of service and in fact.
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The service is either outside the usual course of the business for which such service is performed, or the service is performed outside of all the places of business of the enterprise for which such service is performed.
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The employee is customarily engaged in an independently established trade, occupation, profession or business.
The state refers to the framework as the "ABC" test, a moniker that also applies to California's worker classification law. Such tests aim to determine whether a worker is properly classified as an employee or an independent contractor, a debate elevated by the growing prevalence of gig economy work done on digital platforms.
Misclassification issues may exist in other contexts, however. Last year, FedEx Ground Package Systems paid $2.4 million to resolve allegations that it misclassified drivers in New Jersey as independent contractors.
"Workers who are misclassified as independent contractors miss out on fair wages and benefits," Gov. Murphy said in the press release. "These business practices are unfair, abusive, and illegal and they cannot be tolerated. Today's action will give the state more tools to root-out and prevent misclassification."
Other classification frameworks have been proposed, including at the federal level. In 2020, the Trump administration proposed a final rule that would have adopted an "economic reality" test to determine the nature and degree of workers' control over their own work, as well as their opportunity for profit or loss based on initiative, investment or both. The Biden administration withdrew the rule in May.
