Legislation that would effectively ban most independent contractor relationships has been introduced by Senate President Sweeney and is scheduled to be considered in Senate Labor Committee next Thursday, November 14.

The legislation is modeled on the high-profile legislation recently enacted in California – AB5 – which requires independent contractors to meet an even more restrictive version of the ABC test than currently applies in NJ, in order to justify the working relationship.

But recognizing that such a restrictive approach was not workable for a wide range of industries, the California legislature adopted the test with a significant list of exceptions, carving out some 25 industries. Even with that, California legislators are facing significant backlash, and are working on legislation to exclude additional industries from a test that is plainly not workable as a default rule of employment.

The legislation introduced this week would apply this unworkable default rule across the board with no exceptions.

It is important to underscore how much such legislation would alter longstanding mutually beneficial business models. 

As with the existing ABC test, the modified ABC test would require a worker be “free from control or direction” and be “customarily engaged in an independently established trade, occupation, profession or business.” 

The key change is to Prong B – which workers currently can meet if they perform services “outside the places of business.” Under proposed legislation, workers must establish their work is “outside the usual course of the business for which the service is performed.”

Under this bill, even independent business owners with their own shop, setting own hours, working for multiple businesses can no longer be certain they meet the test as an independent contractor. 

The economic cost and dislocation from this legislation will be significant. The problem is not that we have too much gig economy work. If anything, we do not have enough. The model fits the needs of vast numbers of workers, businesses, consumers, and adds much-needed flexibility and efficiency to the New Jersey economy as a whole.

NJCJI has scheduled a call to discuss this legislation at 1:00 today. Please email Tara if you would like an invitation to participate in the call.

Please contact Alidaif you would like a copy of S4204, as it is not yet publicly available, or if you have questions or would like to discuss this legislation further.