New Jersey and Uber haven't been getting along. First, the state told the rideshare company that it owed $649 million in back taxes. Now the other shoe drops: a bill similar to California's AB-5 is being considered in the Garden State, showing that for entrepreneurs, the region is far from a Garden of Eden.

According to political news site InsiderNJ, the bill--S4204 in the state's Senate and A5936 in the Assembly--would require companies to prove that independent contractors provided services "outside the usual course of the hiring entity's business" or else would have to treat them as employees.

That language has been common for years, but as I've understood it, decisions--generally made by regulators like the National Labor Relations Board, the Internal Revenue Service, and their state equivalents--have typically been on a case-by-case basis. Governments had to determine that a business was in breach.

Laws like this and the one in California turn the onus of proof completely around and place it on the companies. The shift then causes companies to reconsider how they do business because they don't want to get caught on a regulatory issue that, win or lose, would cause them time and money.

It's too soon to get metrics on the impact in California. The law doesn't even go into effect until Jan. 1, 2020. However, anecdotally, the impact is already hitting hard. Media freelancers have already begun to hear that they are losing what were regular assignments. (In California, the law allows writing, photo, and graphic freelancing but limits the freelancers to no more than 35 individual submissions of work per year.) There was even word of a publisher in California looking to cover state and local news with writers from elsewhere because it wouldn't want to manage relationships with the number of individuals it otherwise would need.

In addition, there are people already talking of leaving California and finding other locations that would allow them to work freely and maintain their livings. New Jersey looks like it will be off that list.

For a good reason, as well. The New Jersey bills have few exemptions compared to California's law. Even attorneys, accountants, architects, commercial fishermen, and many others that get at least some relief in the Golden State are left on their own in Jersey.

I know a few experienced self-employed people, who do well financially, worrying that they will have to move out of New Jersey because they won't be able to continue making a living.

Granted, there are likely many companies that abuse the provisions allowing the use of independent contractors. But the answer isn't to overly expand the constraints and force businesses to always treat independent service and product providers as employees.

The temptation must be high for legislators. One possibility is that unions may by pushing for the change, and they can be powerful forces in politics (as can corporations, to be certain). Another is the thought of more revenue. With each employee comes more in payroll taxes, income tax collections through employers, and the like. It may seem that the coffers will fill.

Not if the end result is to chase away these individuals. They already pay taxes, probably higher amounts than employees. If they leave, that money will go with them to another state.

That assumes the the trend stops with New Jersey. It may well not. This notion of further regulating business will appeal to many states and there is no guarantee that the self-employed will be safe to do business in any given state.

This will hurt state economies, companies, and individual businesspeople. Legislators should slow down and talk at length with those affected, not rush bills through. If you live in New Jersey at the moment, it might be a good time to acquaint yourself with the contact information for your representatives.

And if are self-employed anywhere, or own a company that uses contract help, better begin paying attention.

Published on: Nov 19, 2019
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