NJ Senate Bill No. 4204: Amendments to ABC Test Could Prove Problematic to Independent Contractor Status

By: Cristina N. Hyde, J.D.

In January 2015, the New Jersey Supreme Court held that the “ABC” test derived from the New Jersey Unemployment Compensation Act, N.J.S.A. 43:21-19(i)(6), should be adopted to differentiate among employees and independent contractors for the purposes of the New Jersey Wage Payment Law and the New Jersey Wage and Hour Law.  Hargrove v. Sleepy’s LLC,136 A. 3d 449.  Earlier this month, the Senate Labor Committee conducted its first hearing on Senate Bill No. 4204  and on November 18th, the Assembly Labor Committee released a parallel bill, A-5936.  A reaction to concerns regarding the misclassification of genuine employees as independent contractors, Senate Bill No. 4204/A-5936 is an attempt to amend the test’s existing language so as to make it more difficult to claim independent contractor status.

The current language of the test allows for independent contractor status if an employer can prove:

  • Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and
  • Such service is either outside the usual course of business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
  • Such individual is customarily engaged in an independently established trade, occupation, profession or business.

New Jersey Unemployment Compensation Law R.S. 43:21-19(i)(6)(A)(B)(C)].   However, the more restrictive language contained in the bill modifies section (B) insofar as it removes the language which has allowed compliance through a showing that work performed by the individual is away from the company’s place of business.  Therefore the revision requires that an employer must prove that the work provided by the individual is outside the purview of the company’s usual business, without exception.  The bill further restricts independent contractor status by modifying section (C) to be satisfied only if the individual is engaged in an independently established trade, occupation, profession, or business that is of the same nature as the services provided to the company.

Campanella Law Office will continue to monitor Senate Bill No. 4204 and provide periodic updates as necessary.  Meanwhile, the firm stands ready to provide guidance on any worker classification issues that may concern you.

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