Following in California’s footsteps, New Jersey is considering legislation that would create a presumption-of-employment status for independent contractors, which experts warn could upend the business model for the Garden State's transportation industry.
Continue Reading Below
Known as Senate Bill 4204, the legislation largely mirrors California's Assembly Bill 5, which requires companies to use a three-part test in order to establish whether a worker should be classified as an independent contractor or employee.
In order for companies to treat a worker as a contractor, they must prove that the worker is independent and able to perform services free of company control, that the services the worker provides are not part of the company's typical course of business, which means the service provider's business is different than the company's business, and that the person handles work in the industry beyond the contracted labor.
The sweeping law is intended to prevent workers from being wrongly classified as independent contractors and deprived of basic labor protections as a result.
In California, there are certain exempt industries, but the New Jersey law would provide no similar exceptions.
“If passed, [it] would make New Jersey’s law regarding independent contractors the most restrictive in the nation,” the New Jersey Motor Truck Association said in a statement.
About three-quarters of the 600 million tons of goods moved each year in New Jersey are shipped by truck, according to the state’s Department of Transportation. The Port Authority of New York and New Jersey operates the largest maritime cargo center on the East Coast.
“This bill will fundamentally change the transportation business model that has existed for over 100 years,” said Salvador Simao, an attorney for multiple clients who stand to be affected by the law and a former New Jersey Motor Truck Association board member. “This transformation will make New Jersey the most restrictive country in terms of utilizing owner-operators,” he told FOX Business.
The trucking industry’s owner-operators stand to be severely affected by such "gig economy” laws. Owner-operators essentially run their own business, buying their trucks and paying for their own fuel and maintenance. They also stand to earn more than company drivers, taking home a sizable percentage of the haul.
Many transportation companies rely on employee drivers as well as owner-operators.
The bill would “destroy the independent owner-operator trucker model,” Lisa Yakomin, president of the Association of Bi-State Motor Carriers, wrote in a letter to New Jersey lawmakers.
That may push up prices.
"If forced to switch to full-time employee drivers, the tremendous cost increases will be shifted to shipping customers, who will then pass that burden on to the consumer via higher prices, sharply increasing the cost of living and working in the state of New Jersey," Yakomin said in testimony to state lawmakers, shared with FOX Business. "New Jersey already has one of the highest costs of living in America, and is now ranked first in the nation for residents moving out of state. We cannot enact laws that make it even more expensive to live and work here, but S4204 would do exactly that--and our low-income and middle-class residents will feel that squeeze the most."
Yakomin also said rising costs may cause shippers to divert goods to other ports in the Northeast, causing a loss of both revenue and jobs. The Port Authority of New York and New Jersey is responsible for nearly 350,000 jobs and $54 billion in business income in the Garden State alone.
Maher Terminals, the largest marine terminal operator in North America, agreed that the bill “could have significant negative consequences for the ports in New Jersey by adversely affecting independent trucking owner-operators.”
Yakomin asked lawmakers to heed the reaction to California’s bill and to meet with affected parties before moving forward.
In California, where a law aimed to reclassify contract workers is set to go into effect in January, the California Trucking Association sued the state, claiming the legislation would put 70,000 owner-operators out of work.
Some companies in California have already begun warning workers of the likely fallout. Some drivers could be forced to work in other states unless they obtain their own insurance and operating authority – which is not an easy feat.
Supporters of New Jersey's bill, however, say it will prevent widespread exploitation. “Classifying workers as independent contractors as an alternative to full- or part-time employment has been a grossly misused practice of misclassification,” sponsors of the bill wrote in a statement. “It hurts employees and their families who do not have access to critical benefits and protections they are entitled to by law, including minimum wage, overtime compensation, family and medical leave and unemployment insurance.”