The “sharing economy” has brought significant changes, both good and bad, to many aspects of the job market. Rideshare companies, for example, give drivers flexibility in terms of when and how long they work, but this has come with disadvantages. Some rideshare drivers have sought the protection of employment statutes in claims for unpaid wages and other matters. The question of whether they are employees, who are eligible for relief under those employment laws, or independent contractors remains largely unresolved. Various courts and administrative agencies have reached different conclusions. Two federal agencies, the National Labor Relations Board (NLRB) and the Department of Labor’s Wage and Hour Division (WHD), recently issued opinions holding that rideshare drivers are independent contractors. The bases for their conclusions differ from the legal standard used in New Jersey.
A worker in New Jersey is deemed an “employee,” and therefore not an independent contractor, unless their employer can satisfy the three-prong “ABC test.” First, the employer must demonstrate that they do not exercise control over how the person does their job, and that their agreement with the person indicates that they will not exercise such control. Next, they must show that the job performed by the person is not part of their usual business, or that the person does their work away from the employer’s place of business. Finally, they must establish that the person has their own “independently established trade, occupation, profession or business.” N.J. Rev. Stat. § 43:21-19(i)(6).
The New Jersey Supreme Court adopted the ABC test in a 2015 ruling. Several other states have also adopted it. The test generally applies to employee misclassification claims under state law. The 2015 case, for example, involved alleged violations of New Jersey’s wage and hour statutes. Claims under federal law may require separate analyses.