Apparently New Jersey being rated one of the worst business climates and thousands of businesses, jobs and residents leaving the sate is not good enough for Governor Murphy, State Senate President Sweeney (D, Gloucester) and other legislative Democrats. State Senate Bill 4204, sponsored by Sweeney, would end businesses using independent contractors. The law will have a negative impact on companies that use project based professional contract consultants or freelancers. Should this bill pass companies will no longer be able to work with professional contract consultants meaning that projects will leave New Jersey and jobs and tax revenues will leave the state. It’s a lose/lose for New Jersey businesses, a lose/lose for professional contractors and those who work in the “gig economy” and a lose/lose for the State of New Jersey.
The bill would classify all “individuals who perform services for remuneration” to be employees unless determined otherwise by the state’s Labor Commissioner using a three-part test that is closely modeled after California’s recent legislation. For someone to be considered an independent contractor the test requires them to be “free from control or direction over the performance of the service”, that they are performing work outside the normal course of business from the entity hiring them, and that they are customarily engaged in the same kind of work they are being hired to do. The bill would preclude app-based businesses in like Uber, Lyft and Doordash from considering their drivers independent contractors because performing rides is those companies normal course of business. It would also preclude those who perform design, software development and a host of other professional contractors from plying their trade.
This bill puts an end to a “gig economy” in New Jersey. A 2018 Bureau of Labor Statistics report found that as of May 2017 5.9 million workers or 3.8% held contingent jobs and that 79% of workers preferred their current work arrangement to traditional employment.
The IRS already has rules for 1099 classification. Those rules state “People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors”. The IRS has very specific criteria on classification of independent contractors.
Laurie Ehilbeck, New Jersey State Director for the National Federation of Independent Business said “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. 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” Ehilbeck continued “That would leave a lot of people out of work and without income.”
The Democratic Legislature seems to committed to passing this bill during the lame-duck session. This is yet another bill that is destroying the business climate in New Jersey and why we’ve been rated one of the worst business climates in the county. Murphy, Sweeney and the Democrat Legislature should be focused on stopping the flow of businesses, jobs and residents out of New Jersey not making it more difficult to do business in the state or for people to make a living here.
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