The GigReporter

INTRODUCTION

On April 28, 2025, the New Jersey Department of Labor and Workforce Development (“NJDOL”) announced that it was seeking to implement new rules interpreting the ABC test used to determine independent contractor status for the purposes of unemployment insurance, wage and hour laws, and other New Jersey laws. The proposed new chapter of the New Jersey Administrative Code, N.J.A.C. 12:11, was published in the New Jersey Register on May 5[1] and will be subject to written comments from the public for sixty days thereafter.

Much of the proposed new chapter is merely codifying interpretive standards that have already been set forth by New Jersey’s appellate courts; these portions will result in little or no practical change. However, some changes, particularly relating to the B prong of the ABC test, will make New Jersey a much more difficult environment for independent contractors than it already is.

DISCUSSION

An “ABC test” is a strict standard, applied in New Jersey and several other states, that requires individual workers to meet three criteria to qualify as independent contractors. The A prong requires the worker to be free from the direction and control of the hirer, replicating the usual common-law standard. The B prong requires the worker’s service to be either outside the usual course of business of the hirer or outside the hirer’s place of business; the new rule greatly fleshes out what these terms mean. The C prong requires the worker to maintain an independently established business.

The proposed chapter 12:11 addresses each prong of the ABC test in turn, and so shall we.

The A Prong

Proposed N.J.A.C. Section 12:11-1.3 deals with the A prong. It says a putative employer must establish that it does not have the right to control or direct an individual’s work and sets out a non exhaustive list of factors to be considered, which are not applied mechanistically as a checklist. These factors are: whether the individual is required to work set hours or jobs; whether the putative employers controls the details and means by which the services are performed; whether the services must be rendered by the individual personally, whether the putative employer negotiates for the services; whether the rate of pay is fixed by the employer; whether the individual bears a risk of loss; whether the individual is required to be on call or standby at set times, even if not actually, called in to work; whether the putative employers limits the individual’s performance of services for others; and whether the putative employer trains the individual. The rule proposal notes the factors are drawn from preexisting appellate caselaw, so they should not feel new.

What is new, however, is subsection 12:11-1.3(f), which provides that control exercised to comply with government regulation is not given any special consideration and is to be given equal weight to any other type of direction or control. Many other states do have some sort of exemption for government-mandated control, discounting it entirely or not considering it if it’s the only reason the putative employer is exerting control. (See, e.g., Matter of Wannen v. Andrew Garrett Inc., 57 AD3d 1029 (NY 3d Dept 2008).) The rule proposal does not cite any specific jurisprudence for this subsection, so it would seem to be a genuinely new addition that makes qualifying as an independent contractor more difficult.

The B Prong

Proposed Section 12:11-1.4 goes into detail about what qualifies as a “usual course of business” and “place of business”. Subsection (b) states that any activities the putative employer does regularly to generate revenue or develop, produce, sell, market, or provide its goods or services are part of its regular course of business. Subsection (d) includes examples of usual courses of business, and specifically names the hiring of drivers by transportation network companies (i.e., app-based rideshare services) as within their usual course of business.

Even more alarmingly, subsection (e) provides that “places of business” includes physical plants and locations where the putative employer conducts an integral part of its business. Later, subsection (g)(iii) states that “[a] truck, for a trucking company” or “[a] vehicle operated by a driver, whether for a limousine, taxi, transportation network company or delivery service, the purpose of which is to transport people or goods”. With moving vehicles so defined as a place of business, it would be impossible for putative employers to show that delivery drivers are working outside their place of business without also showing their work is not an integral part of their business. Considering subsection (d)’s deliberate inclusion of app-based rideshare companies, this provision also seems targeted toward defining rideshare and app-based drivers as employees.

The C Prong

Proposed Section 12:11-1.5 sets forth a non exhaustive list of factors to consider when determining whether an individual is in an independently established business, including: the duration, strength, and viability of the business, independent of the putative employer; the number of customers the business has and the volume of each respective customer; how much the business earns from the putative employer compared to how much the business received from others; the number of employees the business has; the extent of the individual’s investment; whether the individual sets their own rate of pay; and whether the individual advertises, maintains a visible business location, and is available to work in the market. The section further provides that working for multiple employers, licensure in an occupation, establishing a business organization, or possessing liability and/or workers’ compensation insurance will not in themselves make an individual qualify as an independent contractor under the C prong. The proposal notes that these provisions are taken from case law or longstanding NJDOL practice, so as with most of Section 12:11-1.3 these requirements should seem familiar.

CONCLUSION

NJDOL is clearly targeting app-based rideshare and delivery services with its interpretations of the B prong, with last-mile logistics brokers caught in the crossfire. If delivery vehicles are classified as places of business, logistics brokers will only be able to satisfy the B prong by successfully arguing that their usual course of business is limited only to brokering, and that the delivery work is really the province of the separate businesses run by the owner/operators. Overzealous regulators will probably take a dim view of such arguments, however, especially where logistics brokers are involved with the coordination and scheduling of deliveries.

But these regulations have not gone into effect yet, and are subject to a comment period lasting until July 4. Comments may be submitted in writing, referring to Proposal Number PRN 2025-051, to:

David Fish, Executive Director Legal and Regulatory Services

Department of Labor and Workforce Development

P.O. Box 110, 13th Floor

Trenton, New Jersey 08625-0110

Fax: (609) 292-8246

Email: [email protected]

We also expect there to be litigation challenging the interpretations of the B prong, as such a broad definition of “places of business” threatens to swallow up the statutory distinction entirely.

[1] The citation for this publication is 57 N.J.R. 894(a).