TRENTON, N.J. – New Jersey’s anti-business climate is already legendary, but Trenton may take another step in solidifying its dubious reputation on Thursday by advancing a de facto ban on independent contractors.
Like so many Murphy-era ideas, S4204 (which is set for consideration by the State Senate’s Labor Committee) finds its inspiration in a California law. Senate President Steve Sweeney – himself a long-time labor union official – is the legislation’s primary sponsor, a virtual guarantee that the bill will advance to an eventual floor vote. If passed and signed by law, companies operating in the Garden State would need to prove that an independent contractors is doing something “outside the usual course of the hiring entity’s business.” That’s a seismic and economically impactful change.
What does that mean? In practical terms?
A caterer who contracts with a baking subcontractor to provide desserts for a wedding is in trouble. S4204 could mean that the baker will be considered an employee going forward. Both deal in food and, consequently, are involved in the same “usual course” of business pertaining to what the hiring entity does.
The sames goes for a home building company that retains a concrete contractor for a construction project or a photographer who hires a second cameraman for a big event (like our wedding example above). Employees come with additional, expensive regulations not currently applied to independent contractors. The end result could be a major chilling effect on commerce in New Jersey. Rideshare companies will take a hit, too.
Uber has vowed to fight back and protect its independent contractor business model. The New Jersey legislation’s opponents are quick to point out how much bigger the problem is than trouble for rideshare companies.
“This bill isn’t about just Uber and Lyft. This dangerous legislation ties the hands of every aspiring entrepreneur in the state who owns their own company, including subcontractors with employees who sell their services to another business,” said NFIB’s State Director in New Jersey, Laurie Ehlbeck, whose organization represents small businesses. “The companies that contract with them would hesitate to offer them work if this bill passes because the definition of ‘independent contractor’ would become so broad there would be concern about legal risks.”
It won’t end well. “A similar policy in California created havoc for small PR firms, hairdressers, small construction companies, and many other entrepreneurs—this New Jersey bill will create the same chaos in the small business community here,” added Ehlbeck.
The Democrats’ war on “gig economy” participants also represents a rare point of agreement for Sweeney and Governor Phil Murphy whose administration has made it a point to crack down on so-called “misclassification” of independent contractors. It’s been estimated that there are an upwards of 15.5 million non-traditional workers in the United States.
“If a contractor has his or her own employees, their own equipment, they actively marketed their services, and the business hiring them has no control over their work, they could still be considered an employee if it so happens the work they are doing is within the scope of what that hiring business normally does,” Ehlbeck concluded. “That would leave a lot of people out of work and without income.”