Following in the footsteps of last year’s California Supreme Court’s Dynamex decision regarding misclassification of employees, the New Jersey Department of Labor and the U.S. Department of Labor have joined in an agreement to help protect workers such as truck drivers and Uber drivers from being treated as independent contractors and denied full employee benefits.
The agreement has made New Jersey a “misclassification battlefront,” according to Greg Feary, a partner with the law firm of Scopelitis, Garvin, Light, Hanson & Feary, P.C., lawyers representing the transportation industry.
“It’s political and union-inspired. The misclassification issue tends to be a blue state-red state issue. New Jersey, along with California, Washington and Illinois are examples of blue states that are being very aggressive on the issue of misclassification, and trucking is among the top industries they’re looking at. Whether you want to be an independent contractor or not, the state has said we’re going to extend the social welfare umbrella over to protect you,” said Feary.
The joint agreement is a result of a report commissioned by first-term New Jersey Democratic Governor Phil Murphy which found that 12,315 workers were misclassified with $462 million in wages underreported as well as $14 million in unemployment, disability, and family leave insurance. The report also said that up to 30% of employers misclassify at least one employee as an independent contractor.
Phil Murphy NJ Governor
“Workers misclassified as independent contractors are ineligible for the wage and overtime protections afforded to employees, and can find themselves underpaid and without basic labor and OSHA protections,” said New Jersey labor officials.
The state and federal cooperation agreement “adds teeth to labor enforcement efforts by promoting coordinated investigations and shared resources,” the two agencies said in a recent statement. “The partnership sends a strong message to unscrupulous business owners that misclassification laws are being strictly enforced,” the statement continued.
The issue is at the forefront of concerns for the trucking industry. American Trucking Associations Richard Pianka, deputy general counsel, labels the new report as a “shot across the bow” at the industry. “New Jersey has definitely been actively hostile to the independent contractor model in trucking,” Pianka said. “No question about that. New Jersey is becoming a very difficult environment for the independent contractor model,” he concluded.
Pianka also believes that New Jersey state agencies are “illegally interpreting” existing laws to make it very difficult for “motor carriers to satisfy the statutory criteria with respect to unemployment insurance.” Agencies continue to narrowly construct the state’s statutory exemption for owner-operators under the unemployment statute, according to Pianka.
Trucking industry leaders are particularly concerned over the usage of the ABC test which came as a result of Dynamex. The three-headed ABC test mandates that a worker should be considered an independent contractor if they are A) free from the control and direction of the hiring entity, B) perform work that is outside the usual course of the hiring entity’s business and C) is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.
Carriers tend to struggle with the “B” section of the test because it is almost impossible for carriers to clear this stipulation if they plan to use independent contractors. In California, legislation making the Dynamex decision a state law is pending in the legislature.