The Legislature is considering bills to expand the definition of "employee" to extend minimum-wage, unemployment and other benefits to many individuals who otherwise would be deemed freelance workers. S-4204 and its Assembly counterpart, A-5936, remove one of the exceptions from New Jersey's long-standing "ABC" test established by N.J.S.A. 43:21-19(i)(6)(A)-(C) to distinguish employee from independent contractors. Under the test as it now stands, an individual who performs services for remuneration is deemed an employee unless: (a) the individual is "free from control or direction" in the performance of the work; (b) the services performed are "outside the usual course of the business for which such service is performed or … performed outside of all the places of business of the enterprise for which the services are performed;" and (c) the individual is "customarily engaged in an independently established trade, … or business of the same nature as" the work performed.

S-4204 and A-5936 (which are virtually identical) would strike the phrase "performed outside of all the places of business of the enterprise" from the second prong of the test. The proposal is no doubt related to regulatory and legal challenges to Uber, which the Department of Labor claims owes the state more than $500 million in unemployment and disability insurance taxes since 2015. In addition, a lawsuit filed against Uber in 2017 by Jaswinder Singh, a driver for the ride-hailing service, is pending. Singh alleged that he and other Uber drivers should be classified as employees, not independent contractors, and consequently should be eligible for overtime benefits. The change to the "ABC" test proposed by the Legislature risks major dislocation to the freelance labor market and the "gig" economy. Removing the qualification that the work be performed outside the place of business could potentially bring in freelance writers, telephone solicitation agents, information technology consultants, and per diem attorneys into the definition of "employee." In addition, if the true purpose of the bills is to assist Uber drivers (among others), it may not even be required. Uber sets the pricing for the number of miles driven and regulates the drivers' activities in other ways. It therefore arguably exercises sufficient control under the first prong of the test for its drivers to be deemed employees.

Eliminating the "outside" aspect of the "ABC" test will discourage businesses from engaging independent contractors, thus seriously limiting opportunities for people to work in non-traditional settings. As if to admit the potential for disruption, the bills carve out two significant exceptions to its application: the state government and the construction industry. With respect to the latter, it is almost impossible to imagine construction without independent contractors. Freelance work has been a boon for many people. It allows the homebound to earn income; it enables individuals to tailor their working lives to suit their schedules or personal needs, and it assists in the development of new industries (ride-hailing, for example). The answer to the issues raised by Uber's business model may better be found in strengthening the language of the "control test" in N.J.S.A. 43:21-19(i)(6)(A). It does not lie in the change proposed by S-4204/A-5936.