There are two bills, S4204 and A5936, currently moving through the state legislation that will affect most if not all freelancers and independent contractors in New Jersey, and not in a good way.
The bills are a response to the “Uber” problem where workers are misclassified as independent contractors, allowing the hiring company to avoid paying employment taxes and benefits. This is a true and serious problem that does need to be fixed. These bills are not the solution. They are poorly written and the fallout will be far reaching.
The intention of these bills is to protect workers from being misclassified as independent contractors. The unintended (or maybe intended) consequences are that freelancers and small businesses will be reclassified as employees. If you are or know someone who is a freelancer or a small business (sole proprietor, LLC, et al), if the law passes, they would fall under it. This would severely curtail or end livelihoods for writers, artists, graphic artists, video editors, online teachers, media professionals, hair stylists, healthcare workers, photographers, construction contractors and subcontractors, et al. If you receive a 1099 tax form from the people you work for, you are an independent contractor and will be affected.
The main issues of the bills are as follows are with the “ABC” test, three questions to determine who is an employee and who is an independent contractor/freelancer. For you not to be considered an employee, you must answer ‘yes’ to all three.
Here are the parts of the test:
A: Are you free from control from the company? That is, does the company tell or give directions on what to do?
B: Is the service performed outside the usual course of business, or is it performed outside all of the places of business of the enterprise for which the service is performed?
C: Are you customarily engaged in an independently established trade, occupation, profession, or business?
As a photographer, how would I fare on this with a client?
A - I’m OK here. The client would not control what gear I bring or what settings I would use.
B - I’m screwed here. If I step foot in my client’s office, this bill says I am now an employee. If I have a meeting at my client’s office, I am now an employee.
C - I’m OK here, as I am an established business as an LLC. More on the LLC part below.
- Media professionals that are an LLC/sole proprietor: if you work/meet at your client’s offices, you fail the B test.
- Electricians: if you are hired by the builder as a sub, you are an employee. You fail the B test.
- Online teachers: if you are hired by a company that teaches online, you are now an employee. You fail the B and maybe the C test. Not surprisingly, the Teamsters are in favor of this for long haul truckers, which is an industry that has seen a move to independent contractors to avoid payroll costs.
- Writers, if you meet or work in a client’s office, you are an employee. You fail the B test.
Worth noting is that the bill already has “carve outs” or exceptions for certain industries. If you are clergy, a CPA, a Realtor, a travel agent or insurance agent, you are exempt. I suspect that the special interest groups representing CPAs, Realtors and travel/insurance agents fought for the carve outs when the bill was introduced in early November.
Why this is so important and the law of unintended consequences:
The bills will require the hiring company to prove the independent freelancer is truly an independent freelancer. Will they, before hiring you? Will they go through the extra steps to prove you can answer the ABC test? Will they send it to their legal team, their tax or HR department? What if they are a small to medium sized business without a legal or HR department? Would they pay someone to tell them if they are able to pay you? Most small businesses I know would not. They just don’t have the bandwidth. And because of that, it would cause a chilling effect on hiring. We will be blacklisted.
It’s already happening. California has a similar law that will go into effect on 1/1/2020. Before the law even takes effect, two online teaching companies, VIPKids and Rev, have stopped hiring CA and NJ teachers!
Don’t think it will affect you if you’re an LLC? Oh yes it does! There are no carve outs for LLCs or S Corps.
If this bill goes into effect, many people who enjoy being a freelancer, be it because they love it or because of the freedom to schedule work around life (looking at you work from home parents, caregivers of elderly parents, or the chronically ill, to name a few), and other small businesses who hire small businesses, would be crushed if the law goes into effect without changes.
Is the “Uber” problem a huge problem? Yes. Can it be solved? Yes. Is this the bill to solve it? No. It is a poorly written and horribly rushed bill. I am asking all of you who are either a freelancer or know or love a freelancer, to call and voice your concerns to your state representative. Time is of the essence, please act this week!
Find your rep: https://www.njleg.state.nj.us/members/printable_roster.pdf and call, every day!
Submit your written testimony by Wednesday, December 4th, to the following Senate Labor Committee aides and ask that they be Submitted to the Senate Labor Committee record as testimony on S4204:
Democratic Aide: email@example.com
Republican Aide: firstname.lastname@example.org
Office of Legislative Services Aide: email@example.com
You should also email each of the Labor Committee Members directly:
Senator Fred Madden, Chair, Senate Labor Committee
856-232-6700, 856-401-3073 Email: SenMadden@njleg.org
Senator Joseph Lagana, Vice Chair, Senate Labor Committee
201-576-9199 Email: firstname.lastname@example.org
Senator Anthony M. Bucco, Member, Senate Labor Committee
973-927-2526 Email: email@example.com
Senator Linda Greenstein, Member, Senate Labor Committee
Need more info?
Join us at https://fightforfreelancers.com/
Definition of who is a business in NJ - one CPA’s opinion - https://youtu.be/gnFNDYd3ag4
An attorney’s opinion on what will happen if the law passes - https://wagehourlaw.foxrothschild.com/
On the Uber issue: https://fortune.com/2019/11/27/uber-lyft-employment-laws/