It is important for many employers to hire independent contractors who can perform essential tasks at a lower overall cost than full-time employees with benefits. A bill recently introduced in the New Jersey legislature would create a stricter ABC test for determining who is and who is not a contractor.
The bill would make changes to a number of New Jersey employment laws, including the Wage and Hour Law, unemployment law and Wage Payment Law.
State courts have in the past used the ABC test in rulings on unemployment and employee classification. The proposal would codify an even stricter version of that test, making it more difficult for businesses to classify workers as independent contractors.
The current ABC test holds that a person is an employee unless:
- A: He or she is free from company control or direction
- B: The service performed by the worker is not a part of the company’s core business or is performed outside of the company’s facilities
- C: The worker is typically engaged in an independently established trade, occupation, business or profession
The proposed ABC test would make a big change to B listed above. Companies could no longer satisfy B by showing that work is done outside of their facilities. Instead, they would have to show that the work is not part of their core business.
The change would be felt most keenly by companies using independent contractors to provide their core service or product. It could mean that many workers in the gig economy would be considered employees rather than contractors.
Another proposed change to the ABC test would be in C, which would require companies to receive the same services that he or she provides in their trade or profession.
A National Law Review article on the proposed ABC changes states that “there is a strong possibility that this bill will be passed by the New Jersey legislature.” Please check our Morristown employment law blog for updates.