New Jersey’s Labor Department seeks to crack down on freelancers through new proposed regulations. Copycatting California, these regulations would make it more uncertain and difficult for workers to remain independent contractors.
Now, lawmakers in the legislature aim to stop the regulations through new legislation to protect independent contracting. Senator Declan O’Scanlon, Assemblywoman Vicky Flynn, and Assemblyman Gerry Scharfenberger have proposed a resolution to declare the state’s rules are inconsistent with legislative intent if they are not amended or withdrawn.
O’Scanlon said in a statement:
These proposed rules by the DOL directly contradict the Legislature’s intent and would wreak havoc on independent contractors who rely on flexibility and autonomy to make a living. We’re not going to sit back and let unelected bureaucrats and Trenton Democrats make life more expensive and more complicated for thousands of hardworking people.
The comments by Assemblywoman Flynn are particularly salient for the women of New Jersey:
These rules are a direct attack on worker freedom and the ability of New Jerseyans to control their own livelihoods. For many independent contractors—especially parents, caregivers, and those juggling multiple jobs—this flexibility isn’t a luxury, it’s a lifeline. The Murphy administration’s proposal would rip that away, forcing people into rigid employment models that don’t work for their lives.
We couldn’t have said it better.
What’s Happening
As we reported previously, the New Jersey Labor Department proposed new rules for determining worker classification, making a run around the New Jersey legislature, which failed to codify the same regulations in 2019 following public outcry.
In our organizational public comment opposing the proposed rules, we highlighted how this rule would be damaging:
The proposal would rework the prongs in ways that will make it more challenging to meet the standards and effectively lead to many workers being reclassified. Vague new factors, subcategories, and examples introduce greater confusion and complexity in determining worker classification. Open-ended statements included in the proposed changes that do not clearly define which factors are appropriate for a given situation or how factors are weighed create significant new uncertainty for businesses and independent workers.
We also explained why women would be uniquely impacted.
Flexibility is the primary motivator for women. In 2023, nine out of ten female workers who left full-time employment to engage in independent contract work said they did so to prioritize flexibility over stability.
Independent contracting offers women the ability to manage other priorities, such as caregiving for children, aging parents, or sick spouses, and managing their personal health conditions. Some flexible workers are pursuing their own education. Still, others use freelancing as an entry point into entrepreneurship.
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Losing their independent status leaves women in worse financial, family, health, and personal situations. For many women, independent contracting is not just a preference but the only way they can continue to work because of their unique circumstances.
We know these rules will be damaging based on California’s experience:
New Jersey’s proposed rule harkens to similar legislation passed in 2019 in California. Assembly Bill 5 (AB 5), enacted in 2020, implemented a rigid ABC test that led to devastating consequences across California’s economy. It was assumed that businesses would hire their contracted workforce as employees and absorb the estimated 30% labor-cost increase. However, an employment increase never materialized. Instead, AB 5 spawned the loss of income, contracts, and livelihoods for freelancers. The group Freelancers Against AB5 compiled a list of personal stories from 600 professions impacted by AB 5. Self-employment fell by 10.5%, and overall employment fell by 4.4%, according to research by Liya Palagashvili and others at the Mercatus Center. Critically, as this research found, AB 5 did not lead to the hoped-for growth in traditional employment.
Although the commenting period has expired, the fight marches on. New Jersey’s Labor Department undoubtedly received an earful from men and women across the state about how damaging this proposal would be.
Members of the legislature have also spoken out in opposition after hearing from their constituents about the likely impact of these proposed rules. Now, they are also pursuing legislative handcuffs.
If the Department of Labor seeks to increase enforcement of misclassification, it can do so. However, mass reclassification of all independent contractors is a leap too far.