What’s Next: New Jersey’s S4204

A Quick Introduction to New Jersey’s S4204:

Introduced to the New Jersey State Senate by Senate President Stephen Sweeney on November 7th, S4204 is similar to California’s recently passed AB5. Both bills address concerns that companies are withholding benefits from workers by miscategorizing “employees” as “independent contractors.”

While the two laws place tighter restrictions on independent contractor classifications, New Jersey’s S4204 has more extreme penalties. According to Freightwaves, “Employers found liable for not paying wages due to misclassification would be liable for additional penalties of 200% of damages and other costs… Ongoing misclassification will be punishable by jail time and other fines.”

Read the text of the proposed law here.

How S4204 Will Impact New Jersey Transportation Businesses:

As the bill is currently written, trucking companies that hire independent owner-operator drivers will no longer be able to engage in the practice. In order to continue doing business in New Jersey, they’ll have to hire many of their current contractors as employees.

The most relevant text regards the “ABC test” that state courts have used to determine which workers should be employees, not independent contractors. In order to be an independent contractor, a worker must meet all three of the following conditions:

1. The individual has been and will continue to be free from control or direction over the performance of the service, both under the individual’s contract of service and in fact; and
2. The individual’s service is outside the usual course of the business for which that service is performed; and
3. The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the work performed.

These standards are stricter than New Jersey’s current ABC test. The biggest difference is condition “B.” Today, contractors satisfy condition B if they work outside of a company’s office – if S2404 passes without amendments, that will no longer be the case. Any worker, inside or outside the office, who performs a task central to the company’s core business, will have to be hired as an employee.

What’s Next for S4204:

1. Possible Amendments: Insider NJ reports that amendments have been proposed that will “restore language in the ‘B’ part of the test so that employees working outside the places of the employers’ business will continue to qualify as independent contractors.” If this amendment is added, it’s possible that the law won’t prevent trucking companies from continuing to contract with independent owner-operator drivers.
2. December 5th Hearing: On Thursday, December 5th at 10 am, New Jersey’s Senate Labor Committee will hold a hearing on the bill. Location: Committee Room 6, 1st Floor, State House Annex, Trenton NJ.
3. Probable Passage: With or without amendments, Travel Market reports that the New Jersey legislature will vote on S4204 in the “next few weeks.” Most independent analysts think it is likely to pass both houses and be signed by the governor.

Visit the Regulatory Shift blog to learn what’s next in transportation law.