New Jersey Legislation Targets Independent Contractors
October 23, 2012
The New Jersey Assembly is going after trucking companies it says are improperly listing truck drivers as independent contractors, with a bill that the New Jersey Motor Truck Association warned would cause many trucking companies and owner-operators to leave the state -- along with many of their customers.
The bill (A-1578) would create a presumption that a work arrangement in the drayage trucking or parcel delivery trucking industries is an employer-employee relationship unless the party receiving the services can overcome the legal presumption of employment.
The Assembly Labor Committee released the bill by a 6-3 vote, but it faces Republican opposition as it heads to the full Assembly. There is a Senate version, but no committee hearings have been scheduled.
"By misclassifying workers, an employer can avoid paying certain taxes like Social Security, Medicare and unemployment. This is not the way to do business," said Assembly Deputy Speaker Wisniewski (D-Middlesex), the lead sponsor of the bill. "This bill spells out what constitutes an employee versus an independent contractor to prevent unscrupulous companies from denying employees the benefits and protections they are entitled to."
Testifying before the Labor Committee, New Jersey Motor Truck Executive Director Gail Toth said the legislation would completely change a 50-year-old business model.
The Port Authority of New York New Jersey is already the most expensive port on the East Coast, NJMTA contends, and has many competing ports.
"The high costs to operate at the ports and the recent extreme toll increases have already caused freight diversions to other ports," she said. "If this bill is passed, even more will flee the state."
Toth also said supporters of the bill are perpetrating a myth that owner-operators want to be employees. It points to a January 2012 University of Arkansas study that concluded that owner-operators chose the profession primarily for the "freedom and control and being one's own boss." The Details
Under the bill, trucking services performed by an individual in these industries for pay would be considered employment, unless a company can prove to the satisfaction of the Department of Labor and Workforce Development that:
- the individual has been and will continue to be free from control or direction over the performance of that service, both under his contract of service and in fact;
- the service is either outside the usual course of the business for which the service is performed, or the service is performed outside of all the places of business of the employer for which the service is performed; and
- the individual is customarily engaged in an independently established trade, occupation, profession or business.
Under the bill, an employer who purposely misclassifies an employee as an independent contractor would be subject to criminal penalties of $2,500 for a first offense. If they mislabel workers in error, they could still face up to $1,000 per violation.
Toth noted that past legislators recognized the importance of independent truckers when they provided the exemption from being "employees" if:Services performed by operators of motor vehicles weighing 18,000 pounds or more, licensed for commercial use and used for the highway movement of motor freight, who own their equipment or who lease or finance the purchase of their equipment through an entity which is not owned or controlled directly or indirectly by the entity for which the services were performed and who were compensated by receiving a percentage of the gross revenue generated by the transportation move or by a schedule of payment based on the distance and weight of the transportation move.