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IC miclassification: California bill advances; New Jersey releases report, signs tri-state agreement

July 11, 2019

Independent contractor misclassification was a topic in several states this week. California legislation that could force online human cloud firms and other companies to categorize their workers as employees was approved by a state Senate committee on Wednesday. Separately, the New Jersey governor released a report on misclassification, and the New Jersey Department of Labor and Workforce Development signed an agreement with Pennsylvania and Delaware to share information when it comes to investigations of misclassification.

In California, the Senate’s Labor, Public Employment and Retirement Committee approved a bill that codifies the 2018 “Dynamex” decision by California’s Supreme Court to adopt the stricter “ABC test” for determining independent contractor misclassification. The legislation will now go to the Senate Appropriations Committee; it has already been approved by the House.

“Although it was encouraging to see Assembly Bill 5 amended to allow in a few more independent contractor classifications, millions of small businesses still await a safe harbor away from the California Supreme Court’s Dynamex decision that will take from them their chosen livelihoods by forcing them to be employees of someone,” said John Kabateck, state director of the National Federation of Independent Business in response to the bill.

In an item written before the committee’s decision on Wednesday, Allan Zaremberg, president of the California Chamber of Commerce, had called on the legislature to protect the gig economy.

“The Legislature must get off the sidelines and set the ground rules for the networked, innovative, on-demand economy, not by rolling back the clock as if the gig economy doesn’t exist, but by recognizing and supporting nontraditional workers,” Zaremberg wrote.

Separately, New Jersey Gov. Phil Murphy released a report this week from the state’s Task Force on Employee Misclassification with several recommendations to fight misclassification from creating a hotline to report it to sharing information with other states.

“Our administration has made cracking down on misclassification a top priority, and we will continue to root out contractors who exploit and cheat workers,” Murphy said in a statement.

In an audit last year of 1% of New Jersey businesses, 12,315 workers were found to be misclassified, resulting in $462 million in underreported wages, according to the governor’s office.

New Jersey also announced on Wednesday a reciprocal agreement with Pennsylvania and Delaware to share information and coordinate enforcement efforts.

“All three states have been tasked with protecting our workers, and looking out for those businesses who play by the rules,” said Robert Asaro-Angelo, commissioner, New Jersey Department of Labor and Workforce Development. “This new cooperation agreement will ensure that those crossing state lines to do business are in full compliance with our laws, and employees are taking home every single penny they have earned.”

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