Last month, the New Jersey Supreme Court in Hargrove, et al. v. Sleepy’s LLC adopted the so-called “ABC test” as the only measure by which New Jersey employers and courts will determine whether a particular individual is an employee or independent contractor for wage and hour claims. Hargrove officially cements New Jersey’s membership in the pro-employee class of states that have adopted the ABC test, a diverse class that includes states such as Alaska, Connecticut, Illinois and Tennessee.
New Jersey’s embrace of the ABC test is significant because the test is notoriously skewed against finding any given individual to be an independent contractor. As the court in Hargrove put it:
The “ABC” test presumes an individual is an employee unless the employer can make certain showings regarding the individual employed, including (emphasis added):
A. 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
B. Such service is either outside the usual course of the 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
C. Such individual is customarily engaged in an independently established trade, occupation, profession or business.
Under the ABC test, if an employer cannot sufficiently prove to a court that it satisfies all three parts of the test, the individual in question is considered an employee. Unlike other more balanced measurements, such as the familiar economic realities test or the common law testof employment status, the inherent design of the ABC test “may cast a wider net” of individuals to be classified as employees rather than independent contractors. As such, staffing companies operating in New Jersey should re-examine their relationships with independent contractors to ensure that those relationships satisfy all three prongs of the ABC test.