Trucking Industry Balks At NJ Misclassification Report

Newark, NJ (WorkersCompensation.com) – A joint agreement between the New Jersey Department of Labor and the U.S. Department of Labor to increase employee misclassification protection efforts has those in the trucking industry unsettled.

According to Transport Topics, the agreement to protect employees from being misclassified as independent contractors has turned the state into a “misclassification battlefront,” said Greg Feary, a partner with Scopelitis, Garvin, Light, Hanson & Feary, PC.

“It’s political and union-inspired,” Feary told the transportation industry news outlet. “The misclassification issue tends to be a blue state-red state issue. New Jersey, along with California, Washington and Illinois are examples of blue states that are being very aggressive on the issue of misclassification, and trucking is among the top industries they’re looking at.”

Misclassifying workers as independent contractors means those workers are not eligible for worker protections like unemployment insurance, overtime pay or workers’ compensation.

A report in July from a task force appointed by N.J. Gov. Phil Murphy found that in 2018, the state’s employer accounts section uncovered 12,315 workers misclassified. The report also found that $462 million in wages was underreported and that $14 million in unemployment, disability and family leave insurance was underreported.

The report, which also looked at data from unemployment, insurance and workers’ compensation agencies audits, found that 10-30 percent of employers misclassify at least one worker as an independent contractor.

The task force made 10 recommendations including stepping up enforcement efforts, using the government stop-work powers to revoke the business licenses of companies that misclassify employees, creating better interagency communication and educating workers on how to report misclassification.

For the trucking industry, where many drivers are considered independent contractors, the agreement could have wide reaching implications.

“The (N.J.) State Department of Labor has been auditing a lot of folks and finding misclassifications, but not a whole lot of these administrative decisions have made it to the courts,” said Richard Pianka, deputy general counsel for American Trucking Associations. “The state agency has been very aggressively, and we think illegally, interpreting its laws in a way that makes it extremely difficult for motor carriers to satisfy the statutory criteria with respect to unemployment insurance.”

In other states, interpretation of labor laws has had a serious impact on trucking companies.

Since 2011, nearly 800 California truckers have filed wage claims alleging they’ve been misclassified as independent contractors instead of as employees and that they have been denied the benefits of employment and protection of labor laws. The truckers have sought back pay on wages, overtime pay, unemployment insurance and workers’ compensation. In over 300 of those cases, the courts have awarded drivers more than $35 million in damages. As of May 2019, according to the California Department of Industrial Relations, there were nearly 200 cases regarding wage claims still pending.

California recently adopted the ABC test to determine worker classification. Part of the California courts’ Dynamax decision earlier this year, the ABC test looks at three things: a) how much control and direction the employer has over the worker; b) whether or not the worker performs work outside of the hiring entity’s usual scope of business, and c) whether or not the worker performs similar work for other entities.

New Jersey has also adopted the ABC test of employment. That is where trucking companies, and some truck drivers take issue, attorney Feary said.

“Whether you want to be an independent contractor or not, the state has said we’re going to extend the social welfare umbrella over to protect you,” he said to Transport Times.

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