New Jersey is the newest battleground for motor carriers that use owner-operators, as the state Senate takes up legislation aimed at limiting what workers can be considered independent contractors.
On Thursday, the labor committee is scheduled to debate S4204, a bill introduced by New Jersey Sen. Stephen Sweeney just seven days ago. Sen. Sweeney’s office was unable to comment by press time.
The bill would write into law that New Jersey employers use the “ABC” test to determine whether a driver should be classified as an employee or an independent contractor.
The bill mirrors California’s AB5, a new law that goes into effect next year. AB5 likewise codified ABC as the test for worker status. The test’s three prongs, especially the second one — that a worker perform work that is outside the usual course of the hiring entity’s business — are seen as effectively preventing motor carriers from using independent contractors.
The legislation, which has the potential to raise trucking costs in New Jersey, comes as trucking demand in the state grows thanks to the rise of its port to the No. 2 gateway for container shipments into the U.S.
Upwards of 80% of the containers that move through the New York-New Jersey marine terminals are carried on a truck, with almost two-thirds of those shipments destined for warehousing in New Jersey, as well as other regional markets. The Outbound Tender Market Share for Elizabeth, the state’s largest port complex, has risen 70 basis points over the past six months. (SONAR: OTMS.EWR).
An estimated 6,500 independent owner-operators serve the ports of New York and New Jersey, according to one estimate, accounting for over three-quarters of drayage drivers.
Lisa Yakomin, president of the Association of Bi-State Motor Carriers, said the legislation has consequences for drivers serving the ports. Her group submitted a letter to the Senate’s labor committee saying shippers can easily divert their cargo to other East Coast ports should costs through the Northeast’s biggest gateway rise.
“Shippers on the East Coast have more choices than those out West, and New Jersey must stay competitive to retain our market share,” the letter said.
In addition, limits on independent contractors will weigh on New Jersey’s minority workers more heavily, as close to 40% of the state’s transportation and logistics jobs are occupied by that demographic, according to the Department of Labor. That compares to 30% across all industries.
Likewise, the state faces litigation risk from owner-operators who took part in the Port Authority of New York and New Jersey’s truck replacement program. The program offered to subsidize part of the cost of a 2013 model year or newer truck in return for buyers committing to five years as a port drayage driver.
“We want Senator Sweeney to sit down with various port stakeholders, not just the motor carrier companies, but with these independent drivers who have a lot to say on this issue and find out what the potential hazards of doing this are, and there are quite a few,” Yakomin said.
California’s new law is already forcing many of the state’s 70,000 independent contractors to consider their next move, as motor carriers such as Landstar System and New Prime warn drivers to take steps such as move out of the state or get their own operating authority.
On top of the independent contractor legislation, New Jersey trucking is facing legislation that could mean criminal penalties for employers in wage disputes and the additional costs of providing a portable benefits plan for independent contractors.
“I don’t have a lot of good news on the Trenton front,” said Gail Toth, executive director of the New Jersey Motor Truck Association, at the group’s annual meeting. “They are doing nothing that helps our industry at all,”
She said the totality of the legislation is the result of Gov. Phil Murphy’s agenda to make it more difficult for state businesses to use independent contractors, even if it is their choice.
Murphy “has continued his attack on the independent contractor business model,” Toth said. “All independent contractors, whether they be truckers, retailers, real estate agents, janitors or whomever, it applies to all sectors because New Jersey’s legislature believes we are an ABC test state.”
The opening salvo in this attack was the release of a report from New Jersey’s Department of Labor that advocated that the agency get more regulatory and punitive power over businesses that use independent contractors.
Less than a month after that report’s release, New Jersey enacted a law that will “increase an employer’s risk for misclassification,” according to law firm Genova Burns. It mirrors the SB 1402 legislation that California enacted last year to hold shippers liable for wage disputes arising between drivers and motor carriers.
In New Jersey’s version, though, the penalties are more extreme. Employers found liable for not paying wages due to misclassification would be liable for additional penalties of 200% of damages and other costs. Determinations of ongoing misclassification will be punishable by jail time and other fines.
Another bill that would require employers to pay into a portable benefits plan for independent contractors remains stuck in committee. But Toth said the “ideological bent” of the Murphy administration and the current legislature makes its passage likely.
“I don’t think we have a prayer with this administration because they do not want anyone to be an independent contractor,” Toth said.
Reporter Clarissa Hawes contributed to this report.