The New Jersey Department of Labor adopted rules codifying its interpretation of a test that measures whether a worker is an employee entitled to benefits or an independent contractor who is not, a move made over objections from business groups, gig workers, and freelancers who warned the rules would rob them of needed flexibility.
The new regulations codify the ABC test, whose three prongs measure whether a worker is free from their employers’ control, performs work outside a firm’s regular course or place of business, and engages in business independent of a given firm. Workers who meet all three prongs are independent contractors.
“At its core, this action has always been about protecting workers through fairness and clarity. When expectations are set, responsible employers can compete on a level playing field, without being undercut by those who misclassify workers,” said acting Labor Commissioner Kevin Jarvis.
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The proposed regulations were adopted by Gov. Mikie Sherrill’s Department of Labor and Workforce Development, after being introduced by Sherrill’s predecessor, Phil Murphy.
Under Murphy, the department argued that some businesses misclassified workers as independent contractors to avoid giving them benefits required by law, and that the regulations would declare as employees workers in some fields — most notably drivers for ride-hailing services like Lyft and Uber — that have long fought the designation.
New Jersey has long insisted that those drivers are employees and has sued both Uber and Lyft for misclassifying their workers.
Lyft last year agreed to pay New Jersey $19.4 million for unemployment, family leave, and disability taxes that labor authorities said it failed to pay between 2014 and 2017. Uber in 2022 agreed to pay New Jersey $100 million to resolve similar misclassification claims.
Spokespeople for Lyft did not return an email seeking comment.
Though proposed regulations included examples that said outright some workers, including drivers for ride-hailing services, would outright fail one or more prongs of the ABC test, those examples were not present in the adopted rules.
Like previous legislative proposals with similar goals, the push to codify the ABC test in regulation faced resistance from critics who feared its effects on workers’ flexibility and their employers’ costs.
Michele Siekerka, president and CEO of the New Jersey Business and Industry Association, indicated the group would continue to push against the rules, which will not become operative until Oct. 1.
“Our work here is far from done. We will continue to work alongside the Legislature and administration toward a further revised rule that recognizes the need to preserve the exact jobs and opportunities that remain in jeopardy,” she said.
Labor groups were more sanguine. Charles Wowkanech, president of the state AFL-CIO, said the rule wasn’t intended to hurt businesses.
“We respect the work schedule flexibility that independent contractors enjoy, and we have no issue with legitimate independent contractors,” he said. “However, when intentionally misclassified, businesses drastically increase profits on the backs of working people, and that must end.”
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