'Severely Broken'
New Jersey is emulating California's failed independent-contractor experiment, which ends with people's careers being senselessly destroyed.
October 1 is less than three months away. That’s the day New Jersey’s extreme new independent-contractor rule is scheduled to take effect unless the Legislature steps in and stops it.
As of today, New Jersey’s Legislature shows no indication of doing anything of the sort.
Instead of standing with the people of New Jersey—who have expressed overwhelming objection to what’s happening at in-person hearings and in written comments to the state Labor Department—legislators in the Democratic Party majority are playing favorites and advancing bills to protect only certain favored professions such as financial advisers and insurance providers.
The estimated 1.7 million independent contractors in the state who work in hundreds upon hundreds of other professions remain in the new rule’s crosshairs, very similar to what we all watched happen in California as this same kind of freelance-busting madness ultimately blew apart people’s livelihoods.
I was pleased to see several Republican state senators, including Senator Michael Testa, speak out at a recent voting session of the New Jersey Senate. They rightfully pointed out the insanity of what’s going on with these carveout bills.
As Testa put it about a bill that would protect the financial and insurance professions, “The existence of this bill is truly an acknowledgment that the current independent-contractor system in New Jersey is severely broken.”
Here are his remarks in full:
Senator Testa is correct. When independent-contractor policy based on ABC Test regulatory language is threatening the livelihoods of professionals who earn upward of $100,000 per year, the test is not designed to target misclassified employees.
The ABC Test has been weaponized to attack even the most successful independent contractors. That’s why lawmakers of good conscience need to step in and protect us all from it.
I suggest a two-step process to start.
Step One: Pass ACR73 and SCR62
New Jersey lawmakers should begin by passing ACR73 and SCR62. These concurrent resolutions, already introduced in the state Senate and Assembly, would declare the new independent-contractor rule inconsistent with legislative intent and would invalidate it.
That’s the quick fix to stop the very real threat that is causing even some of the highest-earning professions to seek carveout protections before the rule takes effect October 1.
Lawmakers who don’t want to debate the nitty-gritty regulatory language can simply note that they are alarmed by two specific things the state Labor Department’s wrote in its new rule:
The Department said it is not obligated to address economic research showing serious harm related to the ABC Test regulatory language, which economists say is already depressing self-employment, traditional employment and overall employment across the state
The Department said it’s not relevant to this rulemaking that the administration of Governor Phil Murphy severely mischaracterized data and research to justify ABC Test policies leading up to and including this rule
Those two things alone should be enough to trigger significant legislative action in this policy area. As I noted in my recent report “Extremism vs. Entrepreneurism,” what we have now documented should also trigger an inquest to fully detail just how badly things have already gone wrong.
Lawmakers who need more reasons to step in and invalidate New Jersey’s independent-contractor rule can also choose any or all of the following:
The disproportionate and negative impact this kind of policymaking has on women
The fact that the Democratic Socialists of America and the Communist Party USA champion this kind of policy, as a way to cripple capitalism
The New Jersey Labor Department’s recent acknowledgment that it receives only about 700 filings a year from independent contractors—about 0.04% of people who earn some or all of our income as independent contractors in New Jersey. That’s hardly indicative of a widespread misclassification problem that requires such drastic policymaking
It’s quite the potpourri of problems with this ABC Test rulemaking that lawmakers could cite when they vote to pass ACR73 and SCR72. Policy should be based on facts. Economic consequences should matter. It’s wrong to hurt entrepreneurial women as a way to advance the agenda of Marxists.
This vote shouldn’t even be close.
Step Two: IRS, Not ABC
That same potpourri of problems is also why lawmakers should then shift the state off the weaponized ABC Test regulatory language altogether.
The easiest solution to this freelance-busting madness, as Senator Testa’s pending legislation lays out, is to reinstate the IRS Test regulatory language that can stop real cases of misclassification without threatening legitimately self-employed people.
Independent contractors and the broader business community have been calling for this shift away from the ABC Test for years in Trenton, including at the marathon public hearing that Senator Testa described from back in 2019. In my recent “Extremism vs. Entrepreneurism” report, I also called again for the ABC Test to be jettisoned entirely. It’s no longer being used as a tool to address misclassification. All across the country, it’s being weaponized to attack independent contractors.
The IRS Test is a longstanding solution that works. It would re-establish what federal research has shown actually stopped misclassification in New Jersey going back more than a quarter century now. It would bring us back from this bleeding-edge regulatory craziness that the Murphy administration so wrongly forced into our lives.
It’s not often that something so severely broken in Trenton can be largely addressed in two basic steps.
This is one of those times, and lawmakers should embrace the moment.