Confused about New Jersey’s new “ABC Test” rules on worker classifications? Not surprising if you are. Tom Doherty says the new guidelines leave unanswered questions and may make it tougher for businesses to justify independent contractor classifications in certain circumstances. “There are some provisions in the new regulations, for example, that take away some of the importance of the contractual terms of employment agreements,” he says. The new regulations now raise whether employment agreements were unilaterally drafted by the business or the worker, whether the terms of the agreement are negotiable, and if the agreement contains a clause allowing the business to terminate the agreement at any time. These factors could weigh against an independent contractor designation if the agreement is found to be unilaterally drafted by the business, contain nonnegotiable terms, and could be ended by the business at any time.
Tom says there is an open question concerning a section which states that the new regulations “do not exceed standards or requirements imposed by federal law.” “Technically speaking, these regulations exceed what’s required by federal law, in terms of determining whether a worker is an employee for purposes of the federal wage-and-hour laws, which are found in the Fair Labor Standards Act,” Tom says. “In these regulations, the NJDOL kind of ignores that there is a different standard, at least for wage-and-hour purposes.”
Whether anyone will challenge this inconsistency is uncertain, Tom says, since the new regulations attempt to clarify already applied standards in New Jersey courts. Since a January 2015 ruling in the Hargrove v. Sleepy’s, the courts have been using an ABC test for defining an independent contractor.
Under the newly adopted rules, an employer has to show that A) the worker has been and will continue to be free from control or direction over the performance of services; B) the work performed is either outside the usual course of the business for which the work is being performed, or the work is performed outside of all the places of business of the enterprise; and C) the worker is customarily engaged in an independently established trade, occupation, profession or business.