The New Jersey trucking industry is sounding the alarm on the state’s increasingly stringent policies on independent contractor status.

At a hearing on June 23 for the New Jersey Department of Labor, the New Jersey Motor Truck Association warned that the state’s aggressive enforcement of the ABC test for independent contractors threatens to dismantle a core component of the nation’s supply chain and suffocate entrepreneurial opportunity.

“Entrepreneurs who choose to be owner-operators are now at risk of losing their independence because of a misguided interpretation of the ABC test,” said Eric DeGesero, spokesperson for the New Jersey Motor Truck Association.

What is the Problem With Independent Contractors?

"Employee misclassification" is when companies classify workers as independent contractors in order to avoid responsibilities under the Fair Labor Standards Act and various state employment-related laws, yet in reality treat those workers as employees.

The federal government has gone back and forth over the definition of an independent contractor as administrations change. The Labor Department under the Trump Administration earlier this year said it was reviewing a 2024 Biden-administration rule that made it harder for companies to define workers as independent contractors. 

In the meantime, a May 1 guidance from the DOL’s Wage and Hour Division told investigators not to apply the 2024 rule’s analysis in enforcement matters under the Fair Labor Standards Act.

An "ABC test" where all three of A, B, and C criteria must be met in order to merit independent contractor status, tends to be a harder to meet standard for the trucking owner-operator model than other methods.

“The trucking industry is the linchpin of the supply chain," DeGesero said. “The supply chain needs ‘temporary’ flexibility to operate. That’s the great value that owner-operators bring. And what they covet.”

Owner-operators — independent truck drivers who own and operate their own vehicles —invest heavily in their own businesses, covering the cost of vehicles, fuel, insurance, maintenance, and compliance, according to the association. Many actively choose this path over traditional employment for the freedom, flexibility, and independence it provides.

The association contends that New Jersey’s Department of Labor and Workforce Development has been following an overzealous interpretation of the ABC test to redefine these entrepreneurs as employees.

New Jersey’s ABC Test

According to New Jersey's labor website, New Jersey Unemployment Compensation Law says a worker should be considered an employee unless all the following circumstances apply:

1. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and

2. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and

3. The individual is customarily engaged in an independently established trade, occupation, profession or business.

While the state argues that operating under a trucking company’s authority constitutes “control,” DeGesero, said that federal regulations clearly state that this relationship does not automatically determine employment status.

Supporters of independent truckers say that under all three prongs of the ABC test — control, location of business, and independently established trade — owner-operators clearly meet the criteria for independent contractor status. 

"Their work takes place on America’s roads, not at a central office or depot, and some businesses could survive even if their current carrier relationships end," the New Jersey Motor Truck Association said in a news release.

In May, the department issued new proposed rules that would clarify these rules in a way that appears harder for trucking operations to meet.

The Question of ‘Control’ in Independent Contractor Status

New Jersey’s proposed new rules would require that the putative employer must establish not only that the employer has not exercised control, but also that the employer has not reserved the right to control the individual's performance.

In addition, the proposed rules say a putative employer need not control every facet of a person's responsibilities for that person to be deemed an employee.

The following factors may be considered, the proposed rules say, regarding the question of control:

1. Whether the individual is required to work any set hours or jobs.

2. Whether the putative employer has the right to control the details and means by which the services are performed by the individual.

3. Whether the services must be rendered by the individual personally.

4. Whether the putative employer negotiates for and acquires the work performed by the individua.

5. Whether the individual's rate of pay is fixed by the putative employer.

6. Whether the individual bears any risk of loss for the work he or she performs.

7. Whether the individual is required to be on call, on standby, or otherwise available to perform services at set times determined by the putative employer, even if the individual does not actually perform services at such times.

8. Whether the putative employer limits the individual's performance of services for other parties, such as by limiting the individual's geographic area or potential clientele.

9. Whether the putative employer provides training to the individual.

NJMTA: New Jersey's Hypocrisy

The association also pointed out that the State of New Jersey exempts itself from the same standards it applies to private industry. Snow removal services on the state’s roadways, for example, are routinely outsourced to private contractors — the same type of “temporary services” that NJDOLWD seeks to restrict in the private sector.

“The hypocrisy is staggering,” DeGesero said. “On one hand, the state leans on contractors to keep its roads clear in winter. On the other, it punishes private companies for doing the same.

“With the threat of harsh penalties, including criminal liability for misclassification, many trucking companies are hesitant to engage independent contractors altogether — a chilling effect that could reverberate across the entire supply chain. And anything that makes the distribution of goods less efficient ultimately costs the consumer."