In New Jersey, the Assembly Labor Committee has voted 6-3 to move forward with legislation that would force businesses to classify truck drivers as employees, not independent contractors, in an attempt to prevent employee misclassification.
The bill (A-1578) was sponsored by Assembly Democrats John Wisniewski, Vincent Prieto, Thomas P. Giblin and Annette Quijano. Reiterating the effects of the problem of misclassification, Assembly Deputy Speaker Wisniewski (D-Middlesex) told NJ Today,
“By misclassifying workers, an employer can avoid paying certain taxes like Social Security, Medicare and unemployment. This is not the way to do business. This bill spells out what constitutes an employee versus an independent contractor to prevent unscrupulous companies from denying employees the benefits and protections they are entitled to.”
Details of the proposed bill include:
The bill (A-1578) would create a presumption that a work arrangement in the drayage trucking or parcel delivery trucking industries is an employer-employee relationship unless the party receiving the services can overcome the legal presumption of employment. Under the bill, trucking services performed by an individual in these industries for pay would be considered employment, unless, and until it is shown to the satisfaction of the Department of Labor and Workforce Development, that:
· the individual has been and will continue to be free from control or direction over the performance of that service, both under his contract of service and in fact;
· the service is either outside the usual course of the business for which the service is performed, or the service is performed outside of all the places of business of the employer for which the service is performed; and
· the individual is customarily engaged in an independently established trade, occupation, profession or business.
As we have mentioned in many other articles pertaining to employee misclassification, the practice hurts workers, law-abiding companies and the government which may not receive proper tax revenue and encounters new burdens in collecting it. These problems affect the economy at both the federal and state levels.
The Obama administration estimated in 2010 that cracking down on misclassification could bring in $7 billion over a decade in additional payroll taxes and penalties nationwide. New Jersey has its own share of this problem. In 2005, the NJ Department of Labor found 28,200 workers misclassified and more than $625 million in unreported wages. Similar efforts the following year found nearly 25,000 workers who were misclassified and identified $565 million in unreported wages.
Praising the bill’s passage through the Assembly Labor Committee, Assembly Budget Chairman Prieto (D-Bergen/Hudson) said,
“Companies that knowingly misclassify their workers are denying employees benefits they are entitled to, including the right to workers’ compensation and protection under minimum wage and overtime laws. It’s unethical, and with this bill, it will be illegal.”
It remains to be seen whether or not the bill will pass through the legislature.