New Jersey has taken multiple actions on the independent contractor classification front. On Nov. 7, state Sen. Stephen Sweeney introduced bill S4202, which would adopt a stricter version of the current ABC classification test standard, according to The National Law Review. Separately, Bloomberg Law reports Uber has been slapped with a $642 million bill for four years’ worth of unpaid unemployment taxes for Uber drivers in the state, which it considers employees.
‘ABC’ Codification
The so-called ABC test for determining proper classification of independent contractors has already been in use in New Jersey [1]. As currently applied, a worker can be classified as an independent contractor if:
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.
As written into S4202 [2], the B and C factors would be altered:
A. The individual has been and will continue to be free from control or direction over the performance of the service, both under the individual’s contract of service and in fact; and
B. The individual’s service is outside the usual course of the business for which that service is performed; and
C. The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the work performed.
Prong B becomes more difficult to satisfy under the proposed legislation because it removes the location element. Whereas companies currently can satisfy prong B if the work is performed off premise, under the proposal, a company would only be able to satisfy prong B by showing that the work performed by the individual is outside of the company’s usual core business.
“This modified prong B is potentially troublesome for any business that uses independent contractors to deliver or provide their core product or service, such as those in the ‘gig economy,’” according to The National Law Review [3]. The requirement for prong C is also strengthened, requiring that the individual must provide the company with the same type of services he or she provides in that profession or trade.
Uber Tax Bill
Bloomberg Law [4] reports the New Jersey Department of Labor and Workforce Development has assessed Uber and its subsidiary Rasier LLC with $523 million in past-due taxes over the last four years. The rideshare businesses also may owe up to $119 million in interest and penalties on the unpaid amounts.
“We are challenging this preliminary but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere,” Uber spokeswoman Alix Anfang told Bloomberg Law [4].