New Jersey Independent Contractor Legislation Temporarily Paused

Seyfarth Synopsis: The New Jersey bill that aims to push gig-economy workers and other independent contractors into the definition of “employees” was briefly paused at the end of the prior legislative session, but is expected to be the topic of much discussion in the new legislative session that begins on January 14, 2020.

On January 8, 2020, New Jersey Senate President Stephen Sweeney announced that Senate Bill (SB) 4204, the proposed legislation designed to stiffen independent contractor requirements, would not be scheduled for vote in the 2019 lame-duck legislative session, which ended Monday, January 13, 2020.  Senator Sweeney introduced SB 4204 on November 7, 2019 in an effort to codify a three-part test—the “ABC” test—for independent contractor status.  Senator Sweeney’s proposed bill is modeled off California’s AB5 legislation (approved September 2019 and effective January 1, 2020) and seeks to set forth a more narrow iteration of the ABC test than was established by the New Jersey Supreme Court’s 2015 decision in Hargrove v. Sleepy’s, LLC.

The current bill, which was amended by the Senate Committee on November 14, 2019 and December 5, 2019, provides that “individuals who are suffered or permitted to work are employees, not independent contractors, and are subject to the provisions of [all State employment] laws.”  The amendments for the proposed legislation delineate a slightly less strict ABC test  than originally proposed by Senator Sweeney and provide that for an individual to satisfy the ABC test (as presently drafted) and be deemed an independent contractor, (a) the individual must “be free from control or direction”; (b) the individual’s service must be “either outside the usual course of the business for which that service is performed, or the work is performed outside of all the places of business of the enterprise for which the service is performed”; and (c) the individual must be “customarily engaged in an independently established business or enterprise of the same nature as that involved in the work performed.”     

Employer Takeaway

New Jersey businesses and service providers should continue to monitor SB 4204 (and its counterpart Assembly bill 5936) in the new legislative session beginning Tuesday, January 14, 2020.  Indeed, while the bill faced some significant opposition in November and December 2019 from interest groups for freelancers, gig-economy workers and others, the short delay to the new term does not spell the end of the legislative push.  It remains likely that New Jersey will promulgate an ABC test legislatively, but perhaps with some additional amendments and exemptions, and hopefully with some more careful introspection regarding the potential impact of a stricter independent contractor test.