Senator Singleton’s S943 was amended in the Senate Labor Committee this week and released from the committee.  It has been second-referenced to Senate Budget for further discussion. 

The legislation does not affect the classification standards of independent contractors.  Rather, it would create an alternative mechanism for delivering benefits for independent contractors who provide services to consumers through contracting agents.  

NJCJI has several concerns with the legislation as drafted.  As we explained in written and oral testimony, it would create a significant disincentive against working with freelance workers in the state and impose significant new costs on the business model.  But the amendments adopted in committee move the bill in the right direction.  With further changes, the legislation could help take some of the pressure off of worker classification standards and provide a useful mechanism for some significant number of freelance workers.

Part of argument for restricting freelance work and pushing more individuals into W-2 employment is availability of benefits.  Employees typically comes with a bundle of benefits that include workers comp coverage, as well as health insurance, sick leave, and maybe even a 401(k) retirement savings account.  An independent contractor in business for herself, on the other hand, is responsible for making her own arrangements. 

It’s an arrangement that works well for many entrepreneurs.  But the gig economy has significantly expanded the range of freelancers, and not all are well-equipped to make those arrangements.

S943 would address that problem by imposing a surcharge of 25% or $6/hour – to be paid by the contracting entities to the freelance workers.  Committee amendments would permit the worker to “opt out,” but even for workers opting out, the contribution for benefits merely drops to a payment of 12.5%. 

There are a number of problems with that sort of one-size-fits-all approach.  But Sen. Singleton has indicated an interest in continuing to refine the structure, and we are hopeful that the end result will be a mechanism that provides value to the workers without crushing the independent contractor business model.  Please contact Alida if you would like to discuss this issue further. 

Senator Ruiz has introduced new legislation designed to interfere with the terms of standard consumer contracts.  S1152 would create a rebuttable presumption that various contractual terms are “substantively unconscionable” when included in standard form consumer contracts.  Increasing the risk and litigation expense on arbitration is probably the primary objective of the legislation.  But the legislation would also interfere with forum selection clauses, and its effect on the enforceability of statutes of limitations is not at all clear.

Terms presumed to be unconscionable include:

• Waivers of right “to participate in any collective or class action”

• A forum selection clause that requires the dispute to be resolved outside the “county or district”

• Waivers of punitive damages

• Waivers of rights to assert a claim or “seek a remedy provided by State or federal law”

• A requirement that the individual “bring an action prior to the expiration of the applicable statute of limitations”

• A requirement that the consumer pay “fees or costs” that are “substantially in excess” of costs associated with bringing claims in court.

Penalties?

The legislation would make the inclusion of any term found to be unconscionable a violation of the Consumer Fraud Act.  Penalties include civil penalties, treble damages, and attorney fee shifting.  The legislation also delegates to the courts the question of whether to sever the “unconscionable” term or to invalidate the contract altogether and proscribes even considering the presence of a severability clause when making that determination.  The legislation further prohibits a court from considering the availability of “opt-out” provisions when determining the conscionability of a particular term.

The result would be significant uncertainty over the enforceability of consumer contracts.

How would this legislation affect arbitration agreements?

Creating enforceable class action waivers is among the significant advantages of consumer arbitration agreements.  The agreements ensure that consumers will have the opportunity for informal, individualized dispute resolution, while ensuring that claims will not be hijacked by attorneys bringing classwide claims that typically yield pennies on the dollar.

This legislation would attempt to prohibit such arbitration agreements, by making waivers of “collective or class actions” presumptively “substantively unconscionable.”  This isn’t even a new trick.  In 2005, the California Supreme Court held that waivers on classwide claims were unconscionable when included in standard form consumer contracts covering low dollar consumer disputes.  The result was the landmark U.S. Supreme Court decision of AT&T Mobility v. Concepcion, which held that classwide claims are incompatible with arbitration and therefore preempted by the Federal Arbitration Act. 

Although the FAA preemption is clear, as with legislation enacted last year to ban arbitration agreements in employment contracts, the legislation imposes significant risk on businesses seeking to exercise their federally-protected contract rights.

Please contact Alida Kass if you would like to discuss this legislation further.

Senate Majority Leader Loretta Weinberg (D-Bergen) has introduced Senate Bill 921 dubbed, The New Jersey Fair Work Week Act.

The bill regulates how business with 250 or more employees schedule their workers.

The bill would require an employee to provide a written request of his or her preferred schedule, upon hire.  It would similarly require the employer to provide a “good-faith estimate” of the employee’s projected schedule.

The bill also requires an employer to provide employees’ schedules at least 14 days prior to the start of the work period.  They must give notice of any revision of the posted schedule, and an employee may decline any hours that were not included in the original posting. The bill also provides for employees to receive “predictability pay” for any work schedule change that occurs after the abovementioned advanced notice has been provided.

Employers must pay “each employee a minimum weekly pay not less than an amount nine times the employee’s regular hourly wage,” regardless of how many hours are worked, unless the employee declines the requisite number of hours in writing. 

An employee may at any time request a change in their schedule.  Employers must engage in an “interactive process” and have a “bona fide business reason” to deny any such request.  Employers may not discriminate in favor of employees who are available to work more hours, by paying them a higher hourly rate, or for promotional opportunities.   

Compliance with this legislation would be enforceable with the “wage theft” penalties enacted last year, including joint and several liability for contracting entities supplying labor to the client employer.

The bill was introduced in response to complaints by employees in food service and retail industries.

NJCJI is participating in a coalition being organized by the Restaurant Association.  Please contact Alida Kass if you would like more information about the legislation. 

The clock on the prolifically anti-business 2019 lame duck session finally ran out this past Tuesday.  And as expected, Governor Murphy signed most of the legislation that had arrived on his desk. 

There was one pleasant surprise.  Assemblyman Zwicker’s legislation concerning “payment of independent contractors” was pocket vetoed and has not (yet) been reintroduced.  This legislation was initially drafted to create a mechanism under DOL to ensure payment of freelance workers.  It was then amended on the floor to become a mini Independent Contractor/Worker Misclassification bill – with codification of the ABC test.  It was then amended again to simply incorporate by statutory reference existing standards for independent contractors.

The legislation would have brought collection of payment for contract work under the control of the Department of Labor, which in theory could have created a more efficient alternative to litigation over disputed payment.  But we continued to have concerns that the legislation appeared to impose inordinate penalties even for mere failure to abide by the 30-day payment schedule, creating an incentive for contract workers to bring complaints that might otherwise have been resolved informally.  And given the DOL’s dubious interpretations of existing standards for worker classification, their involvement also risked more second-guessing of legitimate IC arrangements.

So it was a bit of a surprise to see the legislation go unsigned.  What could have been the concern from the governor’s office?  There has been some dispute over the intended effect of S863.  Advocates have argued that it merely codifies “existing law.”  But will sometimes concede the intent is to actually codify “existing agency interpretation.”  As explained in this week’s op ed in the Star Ledger, there are significant differences between those two objectives.  So it’s possible there was concern in the front office that codifying these payment procedures by reference to the existing ABC test, would be read to incorporate the existing interpretive case law.  And that could be problem for a DOL that continues to double down on interpretations that run contrary to that case law.

Reminder: NJCJI will host a strategy meeting for the Independent Contractor Coalition next Thursday, January 30^th at noon.  Please email Tara McCreedy if you would like to attend.

Some of the highlights of legislation that was actually signed into law:

Arbitration:

Assembly Bill 4972regulates organizations that administer arbitration in NJ.  Requires organizations that conduct 50 or more arbitrations in New Jersey to report information about consumer arbitrations including names of parties involved, category of dispute, whether the consumer had an attorney and the outcome.  Prohibits “loser pays” provisions that would require consumers who lose their claims to pay fees and costs of opposing party, and requires fees and costs be waived for “indigent” consumers.  Takes effect May 1.

Severance Pay:

Senate Bill 3170: Legislation creates statutory right to severance pay of one week’s pay per year of employment, whenever an establishment with 100 or more employees terminates 50 or more full or part-time employees within a 30-day period.  “Establishment” includes groups of facilities located within the state.  Also requires 90 days’ notice of layoffs or an additional four weeks’ severance required.  Takes effect July 18. 

Wage & Hour:

Assembly Bill 5840:Under the Wage Theft law signed earlier this year employers jointly and severely liable for wage and hour laws that were violated by contractors. This new law expands that joint and several liability to state employer tax laws, and expands liability to owners, directors, officers, and managers.  Takes effect immediately.

Assembly Bill 5839: Assesses specific penalties for worker misclassification.  The “misclassification penalty” is up to $250 per worker for the first violation and up to $1,000 per worker for subsequent violations. In addition, there is a penalty of up to 5% of the worker’s gross earnings for the past twelve months from the employer who misclassified them. The revenue from the “misclassification penalty” will go to NJ DoL enforcement. The 5% revenue will go as a bounty to the workers. Takes effect immediately

Senate Bill 4228:  Allows the Director of the Division of Taxation to share any tax information with the New Jersey Commissioner of Labor to assist in a NJ DoL investigation. Under current law the Director of the Division of Taxation can only share whether or not a contractor or subcontractor holds a valid business registration, if a license is suspended due to nonpayment of taxed, or wage information with a municipality that is authorized to assess a payroll tax. Takes effect immediately.

Senate Bill 4226: Allows NJ Department of Labor to post on its website name of any person found to be in violation of any state wage, benefit or tax law after final adjudication by NJ DoL Commissioner. Anyone found to have violated a state wage, benefit or tax law shall be prohibited from performing any public work until the liability has been met. Takes effect immediately for any final orders issued after January 20, 2020.

Please contact Alida Kass if you would like to discuss any of this legislation.

The Lame Duck session also ended without legislation targeting independent contractors arriving on the governor’s desk.  It was a great victory for all our allies in the Coalition – especially the freelancers themselves – who called and emailed and even drove to Trenton to testify against legislation that would interfere with their very livelihood.

However, the legislation has been reintroduced in the same form as it was when released from its second Senate Labor Committee meeting, now as S863.  An assembly companion has not been pre-filed for reintroduction.

NJCJI continues to work with an impressive group of organizations and freelance workers who want to preserve the flexibility and opportunity for innovation and entrepreneurship that contract work provides.

NJCJI will be hosting a meeting on January 30^th at 12pm to discuss strategy for the coming legislative session.  Please contact Tara McCreedy if you would like to attend.  Please email Alida if you would like to discuss this issue further.

Despite last-minute changes in the Assembly Financial Institutions Committee to narrow the legislation, A4293 was pulled from the board list on the last day of Lame Duck. 

It was an impressive victory for our friends at ICNJ and the rest of our allies who spent much of this past legislative session, consistently making the case that the expansion of bad faith remedies would serve primarily to facilitate insurance fraud and impose higher premiums on consumers.

Although the senate version moved quickly and was voted out of that chamber in June of 2018, the legislation lingered in the Assembly without even a committee hearing until Lame Duck.  And when the legislation was finally released from AFI, it was limited to first party uninsured or underinsured auto policy claims.

Of course, even in that limited context the penalties would be tremendously disruptive to the insurance market, especially given the unlimited damages of the full jury verdict regardless of policy limit, plus attorney fees.  And it seemed that members were ultimately persuaded that such an extreme remedy would be a disservice to relatively low-income consumers seeking the most affordable insurance options available.

Also of note: there were suggestions during the debate over Bad Faith that the minimum policy limits required by law might be too low.  Although Senator Scutari has not pre-filed his Bad Faith legislation for reintroduction, he has reintroduced legislation that would significantly increase the minimum limits. 

Please email Alida if you would like to discuss this issue further.

The Senate President and sponsor of S4204, Senator Sweeney acknowledged obvious on Thursday, confirming that his independent contractor legislation would not be voted on in the final days of the Lame Duck session.

This legislation was introduced on the first day of Lame Duck and was widely expected to have made it to the governor’s desk.  Instead, an impressive coalition of independent contract workers, including freelance journalists, online tutors, stay-at-home moms with online graphic design businesses among others, came together to express their opposition to the legislation throughout the Lame Duck session.  The group did a phenomenal job of living to fight another day, and we look forward to continuing the collaboration. 

We anticipate that discussion on the issue will resume early in the next legislative session.  NJCJI will continue to lead coalition as we work towards a compromise that protects freedom of workers to choose to work independently.

Please email Alida if you would like to join this working group.

A4293, legislation that would expand bad faith insurance remedies was released from AFI on Thursday, with significant amendments.  The companion bill was voted out of the Senate in June of 2018, by a one vote margin.  As the Lame Duck session comes to a close Monday January 13, 2020, the amended version would now need a floor vote in the Assembly and concurring floor vote in the Senate.

The changes made to the bill as released by AFI are significant.  While the senate version would have applied to all first-party and third-party claims, the assembly version is limited to personal injury claims under uninsured or underinsured auto coverage.  The penalties for “unreasonable” settlement practices have also been modified.  Instead of treble damages, the assembly version actually provides for unlimited damages – significantly increasing the risk of going to trial with a potential bad faith claim.

The senate sponsor, Senator Scutari, testified in support of his legislation, claiming that first party claimants currently have no recourse against carriers who delay payment or offer unreasonably low settlements.  The Assembly Minority Leader, Assemblyman Bramnick, co-prime sponsor on the legislation, agreed, claiming especially in the UM/UIM context, claimants have no remedy because bad faith claims are seldom successful.

NJCJI was among those testifying against the legislation.  We pointed out that a bad faith claim is not the only remedy available for a policy holder who believes their claim is being handled unfairly.  In fact, the Offer of Judgment Rule exists for precisely this reason.  And in fact, the New Jersey Court’s Civil Practice Committee considered precisely the problem the sponsors raised, regarding settlement incentives for UM/UIM claims, and concluded a modest tweak to the Rule struck the appropriate balance.  The Committee never considered anything as drastic as the remedies provided in A4293, but rejected even the more modest proposal of automatic fee shifting, for fear that it would distort incentives and result in higher insurance premiums.

Prospects for a floor vote in Assembly and Senate remain uncertain.  Please email Alida if you would like to discuss this legislation further.

Read NJCJI full written testimony here.  Listen to testimony delivered in Committee here. (Alida Kass testimony begins at 1:13:00)