New Bills Address Misclassification of Employees

first_imgThis article originally appeared in the Jan. 23, 2020 print edition of The Two River Times. New Jersey requires employers to apply what’s called the ABC test todetermine whether a worker qualifies as an independent contractor, Przelomski said. “You are paying for a qualified work force,” Houghtaling said. Thelegislation “is not designed to hurt anybody. It’s designed to eliminate badcontractors.” The legislation is not intended to be punitive, said Assemblyman EricHoughtaling (D-Monmouth), sponsor of the bill authorizing stop work orders forconstruction businesses that misclassify contract workers as employees. S-4204 was met with heated opposition from freelance writers, truckers, wedding photographers, musicians and business groups, including the United States Chamber of Commerce. It’s critical for small businesses to be aware of the laws and make sure they’re in compliance, noted Sherilyn Przelomski of Middletown, a certified human resources consultant whose company, Business Enhancement Services & Training Consulting, advises small businesses on a wide variety of hiring and human resource issues. Those who may be affected by the new rules include construction workers,food delivery workers, UBER and LYFT drivers, seasonal workers and others whoregularly render services to businesses but are not on the employee payroll. Last November the New Jersey Department of Labor and Workforce Development charged the UBER ride-hailing company with failing to pay $530 million in unpaid unemployment and disability insurance from 2014 to 2018. The state tacked on an additional $119 million in interest for the unpaid taxes. UBER is disputing the classification of its drivers as employees,maintaining they are independent contractors.While the new legislation is intended in part to protect the rights of workerswho do the work of full-time employees but don’t receive benefits such as overtime,health coverage, vacation time, unemployment insurance and safety protections, manyworkers who rely on wages from independent contracting services fear that thetightened restrictions will mean less opportunity for freelance work. With the advent of the “gig economy” and the increasing complexity of thelaws governing how businesses use and classify employees, it’s critical foremployers to learn and follow the laws in their state, Przelomski said. The task force noted in its report that the misclassification of employeesas independent contractors has increased by 40 percent over the last 10 years. “It taught me a lot,” she said. “It was quite an eye-opening experience.It was a very vigorous process.” A series of bills aimed at discouraging employers from misclassifyingworkers as independent contractors was signed into law Monday, Jan. 20 by Gov.Phil Murphy.center_img Bills A-5838, 5839, 5840, 5841, 5842 and 5843 expand penalties for themisclassification of workers, increase scrutiny of businesses that are out ofcompliance and allow the state treasury to share tax information with the statedepartment of labor. Not included in the legislation signed Monday was a controversial Senatebill, S-4204, which would have altered the ABC test used to determine if aworker is an employee or a contractor. The ABC test requires employers to ensure independent contractors operatewithout the employer’s control or direction over how they do their job; thatthe service performed by the worker is not part of the company’s usual courseof business; and that the worker is normally engaged in an independent businessor occupation, for example, if they have other clients. Business owners who fail to comply with the new state requirements mayrisk audits and penalties that could result in a sea of red tape and a blow totheir bottom line. The rules apply whether a business is a large corporation or a smallmom-and-pop, Przelomski said. Sponsored by New Jersey Senate President Stephen Sweeney, S-4204 failed toprogress to the governor’s desk before the end of the 2019 session, but itcould be reintroduced in 2020. A joint statement issued by the bills’ sponsors said, “Classifying workersas independent contractors as an alternative to full or part-time employmenthas been a grossly misused practice.” Employers who use unskilled labor to save labor costs instead of payingthe prevailing wage for skilled trades workers undercut legitimate businessesand their workers and risk delivering an inferior product. According to the Governor’s Task Force report, a year 2000 Department of Labor study disclosed that the misclassification of construction workers in New Jersey cost the state an estimated $3.1 to $6.7 million in unpaid unemployment insurance and disability contributions as well as uncollected state income taxes on $11 million in off-the-books employment and $9 million in unpaid employment taxes as a result of the misclassification of employees as independent workers. By Eileen Moon “I went through a department of labor audit for my own business,” shesaid. Her company was tagged for an audit after one of the clients sheconsulted for was audited, which led to an audit of all of the companies thatbusiness issued 1099s for, including Przelomski’s.last_img