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.
The NLRB has authority over claims brought under the National Labor Relations Act (NLRA). This law protects employees’ right to organize for collective bargaining purposes, such as by forming a union or joining an existing union. The statute’s definition of “employee” specifically excludes “any individual having the status of an independent contractor.” 29 U.S.C. § 152(3). It does not, however, define “independent contractor.”
The NLRB’s General Counsel issued an advice memorandum in April 2019 in three cases involving a rideshare company. The memorandum cited the NLRA’s definition of “employee,” and turned to the ten-prong “common-law agency test” in the Restatement (Second) of Agency. This test includes the three prongs from the ABC test, in slightly modified form, as well as factors like “the skill required in the particular occupation” and “the method of payment, whether by the time or by the job.”
The WHD investigates alleged violations of the Fair Labor Standards Act (FLSA), which defines an employee as “any individual employed by an employer.” 29 U.S.C. § 203(e)(1). In an April 2019 opinion letter, the WHD identified its six-prong test for determining whether a person is an “employee.” Again, the test includes the ABC elements, along with factors like “the amount of the worker’s investment in facilities, equipment, or helpers.” The WHD derives the test from Supreme Court decisions interpreting the FLSA and other laws. See, e.g. Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947).
If you are involved in a dispute with an employer in New Jersey or New York, the Resnick Law Group’s employment attorneys are available to discuss your rights and options. Please contact us today at 973-781-1204, at 646-867-7997, or through our website to schedule a confidential consultation.