Being an independent contractor has its perks.Self-employed individuals have the privilege of being their own boss,working when they want, for as long as they want. And if you are not familiar with that feeling, ask any owner-operator. OOs are able to call the shots, earn as much as they want, and only have to spend profits on business expenses.
On the other hand, some independent contractors are taken advantage of by businesses and corporations. Some contractors should be legally classified as employees, but their employers are taking advantage of independent contractor status to reduce the benefits owed to these workers.
But when legislation was introduced to resolve this problem,owner-operators got caught in the crossfire.
When Helping Doesn’t Work
In California, the independent contractor bill known as AB5 would have had an unintended and disastrous effect on owner-operators. This is due to “the ABC test”to determine who is (and is not) an independent contractor.
In case you are not familiar, the ABC evaluation requires businesses to prove their independent contractors are not:
- Able to perform work whenever and however they choose
- Doing work as part of the company’s main business
- Isolated to working said trade, occupation, or business with only one company
As a result of this ruling, OOs would technically be an employee of any trucking business they work for because they are doing the work that is part of the company’s main business of trucking.
But this classification would have made it impossible for trucking companies to hire owner-operators for temporary jobs. The entire business model would have collapsed.
As a result, the AB5 was updated to exclude OOs from having to take the ABC test.
Recent Actions by by New Jersey
With the public outcry in the wake of AB5, you may be wondering why other states would bother to follow in California’s footsteps.
According to a report issued by New Jersey’s Department and Workforce Development, “Misclassification is the practice of illegally and improperly classifying workers as independent contractors, rather than employees. This practice has increased by approximately 40% in the last ten years, and is a growing problem in New Jersey (and other states).”
A 40% increase in worker exploitation is a real problem. To address this, the Governor of New Jersey, Phil Murphy, signed a number of bills with the following effects:
- Penalize businesses that intentionally misclassify workers.
- Businesses must acknowledge the misclassification.
- New Jersey will issue “Stop-Orders” to employers violating state regulations
- The NJ Department of Treasurer and Labor and Workforce Department can share tax data.
- Labor contractors and employers are held equally liable for evading laws related to tax.
Although the term “misclassification”could potentially be used against OOs in the future, the effects of the bills mentioned above should be okay with truck drivers.
But there’s one bill that remains a sore spot for owner-operators.
The Real Problem – S4202
The legislation that could really cause problems for owner-operators is known as S4202,which states “Individuals who perform services for remuneration shall be deemed employees, not independent contractors, and shall be subject to the provisions of those laws”.
To clarify, S4204 would classify anyone working for remuneration, better known as pay, would legally be considered an employee.
That bill would have caused serious problems for owner-operators. Fortunately, the bill never saw Governor Murphy’s desk.
That said, the bill was sponsored by Stephen Sweeney, Senate President in New Jersey, so it may resurface in some form in the future. Truck drivers in New Jersey or those that drive through New Jersey should be aware.