California famously battled to pursue the same objective, a clash that spawned a flood of exemptions and a decline in job opportunities.
For nearly a decade, the political left has pressed to reclassify independent contractors and gig workers as conventional employees. The most well-known flashpoint centered on California, after which the effort largely faded in favor of other regulatory tactics. However, New Jersey is now reviving the reclassification push by adopting a fresh rule aimed at constraining gig work.
The broader struggle can be traced in part to a 2018 ruling by the California Supreme Court, which sparked controversy by declaring that delivery drivers in the state had been mischaracterized as independent contractors. The court held that they should be treated as full-time employees. The decision rested on a strict interpretation of the ABC Test for worker classification, a legal standard that makes it exceedingly difficult to qualify as an independent contractor under the law.
One year later, California enacted its infamous A.B. 5 legislation, extending the ruling to additional industries. The ABC Test comprises several elements, with the most consequential typically being prong “B,” which requires a worker to perform tasks outside the company’s ordinary course of business to maintain independent contractor status. In the strictest variants of the test, this threshold is unattainable for many companies, while milder versions grant more flexibility.
In the wake of A.B. 5, many anticipated that strict ABC tests would spread to other states nationwide. Yet at present, only California and Massachusetts retain the most stringent form. (Numerous states have adopted looser iterations, many of which predated A.B. 5.) California, for its part, has since carved out exemptions for more than 100 industries from A.B. 5, while gig platforms successfully backed a ballot measure in 2020 to secure their own carve-out from the law. Concurrently, evidence has emerged suggesting that California experienced declines in total employment and self-employment after A.B. 5, reinforcing perceptions of the law as a policy failure.”
Confronted with these results, progressives redirected their efforts toward alternative means of challenging the gig economy in recent years. Major cities such as Seattle and New York have instituted higher minimum wage requirements for gig workers, while New York City enacted a statute prohibiting deactivations from platforms without the company first demonstrating “just cause.” Democratic-leaning states including Massachusetts, California, and Illinois have also passed laws enabling gig workers to unionize.
All of these measures aim to apply employee-type protections to gig workers, even when broad-based reclassification has not advanced through the legislative process nationwide. Yet recent rulemaking by the New Jersey Department of Labor and Workforce Development indicates that strict ABC tests are far from extinct.
The New Jersey development—carried forward during Gov. Phil Murphy’s tenure but finalized under Gov. Mikie Sherrill—serves as the culmination of a lengthy state effort against gig giants like Uber and Lyft. New Jersey previously sued both companies over misclassification; settlements were reached despite the firms maintaining that their drivers were properly classified.
The New Jersey Department of Labor and Workforce Development then moved to formal rulemaking to enshrine the state’s view in written regulations. The department contends that it is merely interpreting and codifying the state’s enduring ABC Test—which, it notes, was part of New Jersey law eighty years before A.B. 5 existed. It also argues that it is reaffirming past New Jersey Supreme Court interpretations of the ABC test while avoiding the most stringent formulations of prong B.
But the state’s rationale may be more clever than it seems. First, the department’s rulemaking appears at odds with longstanding precedent rather than in harmony with it. Second, though the new rulemaking technically continues New Jersey’s existing ABC framework, it plainly represents an attempt to import a tougher version of the test into the Garden State.
In the initial proposed rulemaking, the department presented several contracting arrangements that would likely fail the pivotal prong B of the ABC test. One example involved a transportation network company, implying that gig workers on such platforms would be reclassified as employees.
After commentators argued that these highly specific illustrations—included within the regulatory text—amounted to prejudging legal outcomes for gig work and other contracting arrangements, the department responded by removing the examples from the final rule. Although this may lessen future legal challenges, the administration’s intent was clear: under the new rule, gig workers are almost certain to be treated as full-fledged employees.
New Jersey’s approach signals a new trajectory for worker reclassification efforts in left-leaning jurisdictions. Instead of pushing through new legislation, states with looser ABC standards can reclassify gig workers under the pretext of “interpreting” existing law.
A.B. 5 demonstrated the country’s likely outcome—job losses and a wave of lobbying by various sectors seeking exemptions. Yet the reclassification drive is showing renewed vitality nonetheless.
