NJ S863 (previously S4204/A5936) is commonly called worker misclassification, independent contractor or “gig economy” legislation.
This type of legislation assumes that every person must be classified as an employee—and receive a salary and benefits—unless the person can pass a three-part “ABC test” from the 1930s. If the person can pass the ABC test, then he can legally work as an independent contractor. If the person can’t pass the ABC test, then he’s considered “misclassified.” The company that hired him can face steep fines and, in some cases, jail time.
What’s wrong with this legislation? It doesn’t actually solve the worker misclassification problem, and it destroys the careers of people who choose to work for themselves. Legislation based on the ABC test makes no meaningful distinction between an exploited worker and a successful freelance writer, musician, lawyer, plumber, truck driver, wedding photographer, therapist, teacher and many, many others. In fact, the ABC test is so strict, and can be interpreted and applied in such wide-ranging ways, that honest and lawful companies are refusing to work with properly classified independent contractors.
This is far more than a New Jersey issue: California signed into law the first current-decade version of this legislation, called AB5. It went into effect January 1, 2020, and the chaos and lawsuits have already started there across multiple industries. New Jersey’s first version was introduced as S4204 in November 2019, but failed to pass; New Jersey is now considering the same legislation as S863. New York has introduced S6699A, and other states have versions in play too. At the federal level, there is the PRO Act, which would codify the ABC test into federal law.
This type of legislation is badly misguided: Worker misclassification is, indeed, a problem, but legislation must solve that problem without decimating the careers of people who choose to be independent contractors, and who are thriving in their chosen work.
The modern IRS test is a better solution than the outdated ABC test: The IRS test for worker classification lets regulators punish bad-actor companies while still letting creative professionals choose to work for themselves.
Where to learn more: See our video series and these links to articles about New Jersey’s battle and the federal legislation, and then call your lawmakers and tell them to vote #IRSnotABC. Laws based on the outdated ABC test are not “worker protection.” They’re career killers. Legislation based on the modern IRS test is fair to all types of workers.
Vote NO on S863 in New Jersey
Vote NO on the federal PRO Act as long as it contains the ABC test
Vote YES for the modern IRS test