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.