More Americans are turning to jobs in which they can make their own hours and be their own boss. A 2019 survey from the Freelancers Union and Upwork found that the United States now has 57 million freelancers, up from 53 million in 2014, who make up 35% of the U.S. workforce and contribute nearly a $1 trillion to the country’s gross domestic product.
With the number of freelance and gig workers on the rise, some states are proposing bills aimed at protecting this class of workers by guaranteeing them minimum wage and benefits, such as unemployment and disability insurance.
In December 2019, New Jersey lawmakers on the state’s Senate Labor Committee voted 3-1 in favor of a bill (S. 4204) that would prevent companies from misclassifying workers as independent contractors in order to pay them less and not provide benefits. The bill also makes it harder for employers to classify workers as independent contractors and thus avoid paying employment taxes — an issue New Jersey’s labor department currently is taking up with the rideshare company Uber. The state recently charged Uber $650 million in unpaid employment taxes after determining that the firm misclassified employees.
“Misclassification not only hurts workers, it hurts law-abiding businesses in the state,” said New Jersey Senate President Steve Sweeney (D-Gloucester), who sponsored S. 4204. “The businesses that don’t play by the rules aren’t paying into the unemployment fund or the disability fund, which raises the cost for workers in all other businesses.”
The New Jersey bill would codify a version of the “ABC test,” which considers individuals to be employees unless they are free from control and direction from the employer, are doing work that is outside the usual course of business of the hiring entity or outside of the hiring entity’s office, and are customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the work performed.
Proponents of the bill include the New Jersey State AFL-CIO, which called the bill a “‘win-win’ for workers and the state.” The International Brotherhood of Teamsters also supports the bill, stating that misclassification is an illegal practice that hurts workers and their communities. “S. 4204 will expand rights to employees who have been denied them for far too long,” Fred Potter, Teamsters international vice president at-large, said in a statement.
Not everyone is in favor of this recent push to regulate the state’s gig economy, however. The New Jersey State Bar Association voiced concern that the legislation could hurt small and independent law firms, many of which rely on independent contractors. “The flexibility of hiring an attorney or even support staff, such as paralegals or marketing specialists, is more affordable than bringing on part-time or full-time staff for which there is not enough work,” the group said in a statement.
Freelance writers in the state also formed a Facebook group and website, Fight for Freelancers, in response to the legislation. They note that the bill, along with a New Jersey state assembly bill (A. 5936), is so broad that it could do more harm than good. “It’s written in a way that makes no meaningful distinction between an exploited Uber driver and a successful freelance writer, musician, lawyer, truck driver, wedding photographer, therapist and many, many others,” the group states on its website.
California made headlines in September 2019 when Gov. Gavin Newsom (D) signed a bill (A.B. 5) that requires businesses use the ABC test starting in January 2020. California’s bill includes more than 30 exceptions for specific professions after various industries lobbied for amendments. Not exempted are app-based companies like Uber, Lyft and DoorDash, which have committed $90 million to a 2020 ballot measure that would exempt their drivers from A.B. 5 and also offer them some benefits.
“Because we continue to believe drivers are properly classified as independent, and because we’ll continue to be responsive to what the vast majority of drivers tell us they want most — flexibility — drivers will not be automatically reclassified as employees, even after January of next year,” Uber said in a statement.
The New Jersey bill, meanwhile, is subject to another round of hearings and a floor vote.
Last fall, lawmakers in the U.S. House of Representatives also addressed gig economy legislation in a series of hearings on the “future of work.” Democratic lawmakers supported increasing workers’ rights, while Republicans pushed for protecting workers without the need for prohibitive mandates on businesses. Legislation stemming from these hearings could surface this year.
For background, see the May 2013 issue of Congressional Digest on “Raising the Minimum Wage.”
