NJBIA is urging the Senate Labor Committee today to invalidate or require wholesale changes to a controversial Department of Labor and Workforce Development rule adopted last week that makes it much more difficult to be an independent contractor in New Jersey.

NJBIA Policy Analyst Jack Kelly submitted written testimony this weekend, prior to this morning’s public hearing held by the committee, where freelancers and business representatives from a wide array of industries are anticipated to make similar requests.

Kelly and NJBIA President and CEO Michele Siekerka will both offer verbal testimony expounding on those points today, as well.

“(The rule) raises profound legal, economic, and procedural concerns and should be invalidated entirely,” Kelly wrote. “We urge the Legislature to consider an Assembly Concurrent Resolution or Senate Concurrent Resolution to void these regulations.

“Alternatively, the State should use the next 120 days to work collaboratively on statutory remedies that allow these rules to be interpreted in a way that acknowledges the realities of the modern gig economy, and does not infringe upon legitimate independent contractors and their right to maintain that status.”

Over the past year, NJBIA has been the leading business voice opposing sweeping changes to the criteria of the ABC test that determines whether a person is a freelancer or an employee.

The proposal was made by the Murphy administration last year and yielded 9,500 comments in opposition to it. Of the several dozen letters in support of the policy, a large majority were from unions.

Additionally, 24 legislators from both sides of the political aisle, including some on the Senate Labor Committee, urged NJDOL to abandon the proposal.

Senator Declan O’Scanlon, Assemblyman Gerry Scharfenberger, and Assemblywoman Vicky Flynn (R-13) also introduced legislation last year stating that the rule would be inconsistent with legislative intent, should it be adopted.

Last week, the Sherrill administration announced the adoption of the rule as being a mere codification of the ABC rules to prevent misclassification and to provide certainty for businesses.

While the Department did make a small concession in Prong A of the ABC rule, Kelly said it is in the “lack of substantive changes to Prongs B and C, where the Department codified the strictest interpretations of the ABC test derived from New Jersey Supreme Court precedent.”

“It is our contention that this debate was never simply about protecting workers who were truly misclassified,” Kelly wrote. “If it were, a comprehensive study would have first been conducted examining whether the existing federal standards and enforcement mechanisms were actually failing to detect and address unlawful misclassification at the scale being alleged.

“Instead, policymakers moved toward an increasingly rigid classification framework that has evolved into one of the strictest independent contractor standards in the nation.”

The New Jersey rule mirrors a 2019 independent contractor standard in California that resulted in hundreds of exemptions, a reduction in freelance opportunities, job losses and legal battles. That rule was also eventually repealed in the Golden State.

With its decision, the Sherrill administration announced a stay of 120 days for the rule to take effect as it will require statutory changes.

In his written testimony, Kelly recommended a possible solution of codifying a more flexible balancing framework, such as the commonly used IRS test, into statute, or to legislatively reexamine Prongs B and C in a manner that better reflects entrepreneurship, modern independent work arrangements, and the realities of today’s economy.

“An ACR or SCR would also allow the NJDOL to revisit these regulations through an appropriate APA process after conducting a meaningful investigation into whether existing standards and enforcement mechanisms were truly insufficient in preventing employee misclassification, and where the IRS framework allegedly failed,” Kelly wrote.

“That inquiry is particularly important given the disparity between the scope of misclassification alleged by prior administration and the actual enforcement activity undertaken by the State.”

To see Kelly’s full written testimony to the Senate Labor Committee, click here.

Reporters/producers interested in speaking to NJBIA can reach out to NJBIA Chief Communications Officer Bob Considine at bconsidine@njbia.org.