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NJ 2025 State of the State: Phil Murphy on property taxes/minimum wage
New Jersey Gov. Phil Murphy gave his final State of the State address. Here he talks property taxes and the minimum wage.
- NJ argues that by classifying workers like drivers as freelancers, firms such as Uber, Lyft, DoorDash and GrubHub avoid disability and family leave insurance payments, and unemployment payments
- Proponents of freelance work argue that it provides a flexible means to earn extra income, whether a delivery driver, a trucker picking up freight, a wedding photographer, caddie or journalist
Truckers as well as drivers for such rideshare apps as Uber, Lyft, DoorDash and GrubHub could be classified as regular company employees and not freelance workers in New Jersey under a new rule proposed by the state Department of Labor.
The rules could increase labor costs for those businesses and others that use freelancers. But according to advocates, they could provide greater benefits and protections to workers currently classified as independent contractors.
And they come three years after rideshare app Uber agreed to a $100 million settlement with the state over allegations that the rideshare company improperly misclassified nearly 300,000 workers as freelancers rather than employees between 2014 and 2018.
New Jersey labor officials also allege that rideshare app Lyft owes the state $17 million for similar worker misclassification practices, New Jersey Monitor reported.
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State officials have argued that by classifying workers like drivers as freelancers, firms such as Uber and Lyft are able to avoid legally required disability and family leave insurance payments, as well as contributions toward the state’s unemployment and temporary disability funds.
The practice also deprives workers of traditional protections including minimum wage and overtime, according to state officials.
Proponents of freelance work argue that it provides a flexible means to earn extra income, whether it’s a delivery driver at DoorDash, an Uber driver, a trucker picking up freight from the Ports of Newark and Elizabeth, a DJ, a freelance wedding photographer or musician, or a journalist.
What the proposed rules do
The rules are a culmination of existing case law and statute, which would be codified under the proposals, state labor officials said in an April 28 notice.
To be considered an independent contractor and not an employee under existing state law, businesses have to use what’s called the “ABC test.”
According to the state Labor Department, it requires that freelance workers:
- A: Are free from control and direction by the business
- B: Do work outside of a firm’s “usual course of business” and “places of business”
- C: Are engaged in an independent, established “trade, occupation, profession or business”
For a “transportation network company” — one where drivers transport riders from one location to another — “the services performed by the driver are likely not outside of the transportation network company’s usual course of business,” reads the 33-page proposal.
That means that freelance drivers would likely not meet the second prong in the ABC test that defines independent contractors.
Therefore, they could be considered regular employees rather than freelancers under the proposal, making them subject to employment taxes but also workplace protections not afforded to gig workers.
“The [state] Department of Labor basically wants to eliminate the independent contractor relationship in almost every form, including drivers of Lyft and Uber,” said Adam Busler, a partner and labor attorney at the law firm Fox Rothschild.
Impact on caddies, drywall installers, airplane workers, drivers?
Lyft spokesperson CJ Macklin said in an email that the proposed rules would “force an outdated employment model” that “would only serve the hurt drivers across the state.”
The rules list other examples of workers classified as freelancers when they could likely be employees, including a caddie at a country club, and a drywall installer for a drywall installation company.
Truckers, airplane workers and drivers at a “transportation network company” who “transport people or goods” would not likely be independent contractors, under the proposed rules, “because they are locations where the putative employer conducts an integral part of its business.”
The state labor department will formally publish the rules on May 5, after which there would be a 60-day public comment.
Are rideshare drivers gig workers or company employees?
In 2019, Uber executives tried to argue that passenger transportation was not in the company’s core business, according to media reports, meaning that the drivers could not be employees.
Uber’s $100 million settlement did not admit “that their drivers are employees,” said James Cooney, a labor professor at Rutgers New Brunswick and former labor mediator.
“They still take the position nationwide that their drivers are independent contractors, [but] when you pay $100 million, some people might interpret that otherwise.”
California mounted numerous legal battles and challenges, ultimately unsuccessful, to have rideshare drivers classified as company employees and not gig workers.
New Jersey lawmakers introduced a bill in 2019 that would have classified gig workers as regular employees, though the measure ultimately stalled.
“I think over the years they’ve just been paying settlements but still refusing to admit their drivers are employees,” Cooney said of Uber.
Efforts underway for stricter federal rules
In January 2024, the Biden administration proposed stricter rules for freelance workers that could affect those doing work for app-based companies and other industries that rely on independent contractors, such as trucking, Reuters reported.
Federal labor protections including overtime and minimum wage typically do not apply to freelance workers, only employees.
But overall, federal rules are less stringent than state rules, especially ones that use the ABC test. The fate of the federal rules is unclear under the Trump administration, which has taken a more deregulatory approach with business rules.
Joanna Hawkins, a spokesperson for the U.S Department of Labor, did not have any updates.
However, a federal judge in New Mexico upheld the rule this past January.
NJ officials say there’s rampant worker misclassification
A 2020 state audit, the most recent data available, of 1% of businesses in New Jersey found 7,149 misclassified workers, $443,356,502 in underreported gross wages and $13,694,187 in underreported contributions, including temporary disability, unemployment and family leave insurance. When problems are discovered, the state sends businesses a bill.
The state says it’s pursuing multiple approaches to fight the problem.
Early in his first term, Gov. Phil Murphy created a task force to uncover misclassifications, and in 2021 bipartisan legislative support gave the Labor Department the power to issue stop-work orders. This allows the department to shut down operations of businesses with violations.
Daniel Munoz covers business, consumer affairs, labor and the economy for NorthJersey.com and The Record.
Email: munozd@northjersey.com; Twitter:@danielmunoz100 and Facebook
Source: Under NJ rule, some freelancers, like Uber drivers, could be classified as employees
