By Rosemary Becchi and Patrice Onwuka
Can labor policy get any worse than destroying flexible jobs and driving self-employed professionals out of work? California did this by cracking down on freelance and gig work, leading to devastating results for its independent workforce and small businesses a few years ago. Now, New Jersey is set to replicate this hardship in the Garden State.
The New Jersey Department of Labor and Workforce Development (NJDOL) proposed new rules governing independent contractors in the state. The state claimed to be clarifying the application of the current ABC test to determine independent contractor status. The three-pronged employment test generally requires that an employer does not exercise control over a worker, the worker’s services are not part of the company’s business services, and the worker is in business for himself or herself.
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The proposed rules offer no better guidance but great confusion, leading to far-reaching negative consequences for workers, small businesses, and consumers. Business groups and independent workers are rightly alarmed. The National Federation of Independent Businesses commented that the proposal alters the simple ABC test into a “convoluted classification system, hindering the ability of small businesses to hire independent contractors.”
The public hearing for the proposals drew standing-room-only attendance as freelancers spoke out in opposition, explaining how their livelihoods would be at stake. Lisa Yakomin, president of the Association of Bi-State Motor Carriers, testified that it would “paralyze our regional supply chain.”
Democratic leaders and state lawmakers have called on the NJDOL to abandon the rules and work with the legislature, rather than around it, to address any concerns with independent workers.
The outcome of New Jersey’s proposed rules will reduce the number of independent workers in the state. This would create significant hardships for the freelancers, gig workers, and self-employed professionals such as truckers, writers, drivers, home care workers, and more, who choose this mode of work to meet the demands of their unique circumstances.
Today’s workers, especially women, seek flexibility. Unlike traditional employees, independent contractors control when, where, how, and for whom they work. They are balancing earning income while raising children, caregiving for aging parents, and managing their own health issues. Independent contracting is also an on-ramp into entrepreneurship for many.
Over 80% of independent contractors nationwide said they wanted to be independent and not someone’s employee, according to the Bureau of Labor Statistics.
Yet, too many policymakers are stuck in an outdated mindset that traditional employment is best for all workers. They employ reclassification to place greater restrictions on independent contracting. Stringent standards and arbitrary tests serve the same purpose: mass reclassification. By murkying the water for employers, policymakers think companies will either end their independent contractor relationships or hire the workers as employees to be in compliance with the law. Small businesses, especially, cannot afford the costly risks of misclassifying workers.
California’s example proves that mass reclassification efforts have devastating consequences that ripple across an economy. In 2019, the legislature passed Assembly Bill 5 (AB5), which codified an ABC test. The law was implemented just as the pandemic began. The assumption that businesses would simply hire their contracted workforce as employees did not materialize.
Instead, AB5 spawned the loss of income, contracts, and livelihoods for freelancers in over 600 occupations. The law was so sweeping that over 100 other occupations of workers had to be exempted. Self-employment fell by 10.5%, and overall employment fell by 4.4%, according to research by the Mercatus Center.
AB5 forced professions that once offered lucrative, flexible opportunities for women, especially older women, into extinction, leaving people like Jessica Tucker, of Loma Linda, Calif., “marginalized.” Tucker once thrived as a transcriber, earning $60 an hour for her services while working at home, pursuing a master’s degree, and raising two children. “AB5 took this away completely, and my family has been struggling to put food on the table ever since.”
No worker should be forced into a traditional 9-to-5 job. This is an 80-20 issue. In our Independent Women polling, 82% of women and overall voters, 80% of young voters, and 79% of seniors agree that the government should allow people the flexibility to be independent contractors.
In New Jersey, career women like Tema Steele, a New York Life agent, pleaded with the DOL to halt this rule change. “Please don’t destroy my career,” Steele told fellow New Jerseyan and freelance journalist Kim Kavin. This is “a career that helped me stand on my own two feet and raise my children.”
We hope the Murphy administration learns from California’s experience and heeds the outcry from women, freelancers, and lawmakers to leave independent contractors alone.
Rosemary Becchi is President and Founder of Jersey 1st.
Patrice Onwuka is Director of the Center for Economic Opportunity at Independent Women.
