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BusinessLegal issuesNewsTruckingTrucking RegulationTrucking Risk & Compliance

New Jersey’s new laws put more teeth in driver classification cases

As New Jersey’s legislature readies another bill this year aimed at worker misclassification, a series of other newly signed laws that give the state greater investigatory and punitive powers poses an even larger risk to motor carriers hiring owner-operators to haul their freight, according to one legal expert.

Last week, state Sen. Steve Sweeney introduced S863. The bill is nearly identical to S4204, which was introduced in November 2019 but failed to pass.

Both bills require New Jersey employers to apply the “ABC” test to determine whether to classify a worker as an independent contractor or as an employee.

In a statement to FreightWaves, Sen. Sweeney said the bill’s aim is to make sure workers are given legal rights on minimum wage, overtime, disability insurance, family leave, and appropriate tax withholding that independent contractors must negotiate on their own.

“The bills that were considered in the Senate and Assembly are unquestionably pro-worker measures that will simply codify into law existing regulations that have been supported by legal decisions,” Sweeney said. “These rights and protections are lost when workers are misclassified as independent contractors.”

Transportation groups including the Association of Bi-State Motor Carriers and the New Jersey Motor Truck Association (NJMTA) sought to defeat the original bill due to the hurdle the ABC test creates for motor carriers in hiring independent contractors.

Although (S4204) failed in the lame duck session, the Senate president has reintroduced it in the new session as Senate Bill S863 and is still committed to moving it,” the NJMTA said in a legislative update.

Along with trucking, other professionals employed as independent contractors and represented by the group Fight for Freelancers lobbied for the bill’s defeat due to the impact on the hiring of freelance professionals. Fight for Freelancers said it will oppose S863.

Sen. Sweeney said he is taking the concerns of these groups seriously, and promises to give them a longer hearing in the current session as opposed to the roughly two-month time slot for debate on S4204.

“We will continue to have meaningful discussions with stakeholders, business leaders and advocates as we seek to produce the fairest and most responsible bill possible,” Sweeney said. “As with all legislation it is far more important that we get it done right than to get it done fast.” 

NJ ramps up misclassification penalties outside of S863

The specter of New Jersey once again trying to codify the ABC test means motor carriers may have to reevaluate how and when they use owner-operators. But other newly enacted legislation makes the use of independent contractors just as risky, according to Sal Simao, the chair of Ford Harrison’s employment and transport practice groups. 

“People were really distracted by S4204,” Simao said. “Everyone was so focused on getting S4204 pulled they lost sight of these other bills that create much more risk for independent contractors.” 

In November, Simao highlighted some of the ancillary bills on employee misclassification that were being debated at the time of S4204.

This week, New Jersey Gov. Phil Murphy signed many of those bills into law, and most take immediate effect.

Simao said these laws give the state labor department “newfound powers” with regard to driver misclassification. While the legislation presents more risk for motor carriers, he cautions that it is still unknown the extent to which the labor department will exercise these powers. 

“The hope is the (labor department) will use them judiciously and eventually issue regulations or guidance as to how this power should be implemented,” Simao said.

Among the new laws are S4228. It allows the state’s treasury to share any tax information with the labor department to assist in an investigation. The previous law limited treasury information sharing to whether a contractor has a valid business license and whether city and county taxes were being assessed.

Simao said the new law gives the department the potential to launch targeted investigations of particular industries, without doing audits of employee rosters. Instead, the labor department will be able to ask the state treasury for the 1099s that were filed and cross reference those with the contractors’ tax returns. 

Based on these tax returns, the labor department may determine whether the contractor had other sources of income to make an initial determination if the contractors were misclassified.

“Historically, investigations were complaint-driven,” Simao said. “Now they are targeting industries they believe are out of compliance, such as trucking. The burden from an unemployment tax perspective is incredibly low.”

New Jersey’s outbound tender volumes have risen through the year. (SONAR: OTVI.NJ)

Another new law, A5838, will allow the labor department to enter or to subpoena a business to get records related to any worker complaints about state wage or tax violations. Businesses that don’t comply with the request will be fined $1,000 per day.

A harsher penalty in A5838 is the ability of the labor department to issue a stop-work order when it makes an initial assessment that there has been a tax or wage-hour violation. Companies that refuse to comply with the stop-work order face a $5,000 per day fine. Simao said employers will have only 72 hours to appeal the order, which can be a problem for out-of-state companies with small satellite offices or any company that doesn’t have immediate access to items left at the work site.

“The labor department must give notice at the location of the violation,” Simao said. “Due to the broad language of the statute, they could show up and give the notice to the receptionist and walk out.”

Employers are limited to seeking an injunction in state court to fight the stop-work order. But Simao said injunctive relief is also a risky bet.

“Getting an injunction is incredibly expensive,” he said. “If the company loses and the judge issues a decision that negatively impacts the underlying case it may cause more harm than good.”

The department will also be able to impose bigger fines on employers that have been found to misclassify workers. Assembly Bill 5839 allows the labor department to impose a “misclassification penalty” of $250 per worker per violation, rising to $1,000 for subsequent violations. Misclassified workers may also receive 5% of gross wages earned during the misclassification period as part of that penalty. 

Simao said those fines can mount up since the labor department may count each work week for each employee as a separate violation. Moreover, the bounty offers an incentive to independent contractors to go along with labor department rulings.

“Motor carriers will need the testimony of independent contractors in order to successfully defend against misclassification, but why would an independent contractor provide testimony for the motor carrier if they will get a pay day if the carrier loses?” Simao said.

Owners that face penalties in misclassification may not be able to use their business entities to shield themselves from those penalties. Another law, A5840, mandates that owners, directors and potentially customers can be held individually liable for the claims.

“Fighting the assessment takes years, is expensive and during this time penalty and interest continue to accrue,” Simao said. “Without testimony from owner operators, who are disincentivized to cooperate it is extremely difficult to win and if you lose the labor department can pursue the individual owner’s personal assets.”

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Michael Angell, Bulk and Intermodal Editor

Michael Angell covers maritime, intermodal and related topics for FreightWaves. His interest in transportation stretches back several generations. One great-grandfather was a dray horseman along the New York waterfront and another was a railway engineer in Texas. More recently, Michael has written about the shipping industry for TradeWinds, energy markets for Oil Price Information Service, and general business topics for FactSet Mergerstat and Investor's Business Daily. When he is not stuck in the office, he enjoys tours of ports, terminals, and railyards.

6 Comments

  1. Quote:
    “Transportation groups including the Association of Bi-State Motor Carriers and the New Jersey Motor Truck Association (NJMTA) sought to defeat the original bill due to the hurdle the ABC test creates for motor carriers in hiring independent contractors.”

    WHY ? Cause they want to FLEECE !

    Quote:

    ““People were really distracted by S4204,” Simao said. “Everyone was so focused on getting S4204 pulled they lost sight of these other bills that create much more risk for independent contractors.” 

    LOL ! I’m loving this !!!

    Quote:

    “Simao said these laws give the state labor department “newfound powers” with regard to driver misclassification. While the legislation presents more risk for motor carriers, he cautions that it is still unknown the extent to which the labor department will exercise these powers. ”

    EXERCISE THEM AT THE FULL EXTENT 100% , not even at 99.9% , AT 100% !!!!

    Enough with the fleecing of truck drivers already , ENOUGH !

    Quote:

    ““Historically, investigations were complaint-driven,” Simao said. “Now they are targeting industries they believe are out of compliance, such as trucking. ”

    Quite simple , just verify them ALL and speak with the “drivers” ! You’ll collect back taxes GALORE !

    Enough with the minimum wage in regards to labour laws concerning truck drivers . REVISE that minimum wage hocus pocus level & RATIFY FAAAA ! OBLIGE every co that hires a truck driver to have a written contract between the employer and employee stipulating the driver’s wage . If the driver is paid x per mile then use it based on a minimum of 54.5 miles per hour on average and that’s the minimum wage in that particular driver’s case per hour , UNLESS proven differently according to the average miles logged per hour driven over a period of 2 weeks or 10 working days ! IN MY FREAKIN’ OPINION !

    1. While you’re at it , create a labour law that stipulates after 8 hours worked/on duty in a day , the following time within that same 24 hour period worked/on duty is paid at time and a half ! Enough with the abusive gimmicks of enslavement ! Also , allow drivers the RIGHT TO REFUSE working more than 8 hours per day without being penalized by the employer .

      YOU DRIVERS FEELING STRESSED ON THE JOB due to ELD’s or any other reason due to the job , go see a doctor , and or psychologist and get yourselves put on sick leave before your stress aka PTSD develops into something much worse ! Stress is exhaustive and prevents proper rest and thus elevates fatigue putting your and others lives in danger on the road ! If the clowns in the system want to push you and under pay you , push back and make them pay ! There’s your “protest” ability ! Get yourselves on sick leave and get paid while not driving ! There’s YOUR “shutdown” !

      As NIKE would say , JUST DO IT !

      In my opinion ………..

      1. Quote:

        “There are over 3 million truck drivers employed in the commercial transportation and material moving occupations, one of the largest occupational groups in the United States. Workers in this large and growing occupational segment are at risk for a range of occupational health-induced conditions, including mental health and psychiatric disorders due to high occupational stress, low access and use of health care, and limited social support.”

        Quote :
        “Lakehead tries to figure out trucker depression ”

        “We need to have real conversations about mental health. And we need better research that includes input from drivers themselves about what’s happening out on the road that impacts their health and well being,” said Joanne Ritchie, executive director of OBAC.”

  2. It’s delicate times my friend. The more “drivers” push the sooner we will see autonomous. Look how fast they’ve changed the “laws” for platooning and following distance.., under the Radar in most cases. I’m not suggesting to take it… but it’s a slippery slope. I agree with a lot of your stuff.. but being an independent contractor is also an opportunity as much as it may be a negative.

    1. The quicker and harder we push , the quicker we will be in a position to take advantage of these autonomous trucks ourselves (wink)

      Don’t make it easy for them to replace us . Front run them and replace them . Then we’ll replace ourselves in transport while still profiting from it .

      In my humble opinion …………

      1. By the way , they can’t fire you while you’re on sick leave . You can be on sick leave for years upon years . That’s the one thing they can’t control unless they go bust . If they go bust then that’s one less we’ll need to deal with , LOL !

        A “mental issue” isn’t easy to cure and there are so many . It can be a burn out , a metal block ,depression , stress , etc etc etc . The sky is the limit . Psychologists aren’t even advanced enough to understand them all , LOL ! Give them a run for their money and be a “difficult case” ………

        It’s a poker game and it’s time to call their bluff . Anyone can be played , anyone . I simply prefer to outsmart them by beating them at their own game through an Alliance . However, one can play as dirty as they are , but legally if they keep pushing . The point is they have no right to pick our pockets through their little shenanigan tactics .

        Two can play that sort of game and their pockets are a lot deeper than driver’s . It is not they that have the last word , it’s the drivers that do . Always position yourself to have the last word . These clowns are far from being the sharpest tool in the shed .

        In my humble opinion ……….

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