I have blogged numerous times about the strictness of the New Jersey A-B-C test as applied to possible independent contractors. The prime example of this is the very recent assessment of Uber for $650,000,000 in back-due unemployment contributions. This incredibly large assessment, certain to be litigated about for years, is a sign to employers, large, small or otherwise, that the State of New Jersey has declared war against any designation of an individual as an “independent contractor.”
Uber will certainly fight this to the hilt, as such an unbelievable assessment is a direct, systemic threat to its business model. The Company stated that it is “challenging this preliminary but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere.”
Uber can (and will likely) seek an informal meeting with NJDOL officials, with someone titled the Redetermination Auditor to see if it can cut a deal. The reality is that the DOL will never agree that all (or any) of these individuals are independent contractors and Uber will likely never concede that any of them are employees because that would have nationwide consequences. Even if the NJDOI agreed to cut the assessments down to nominal, nuisance value amounts, Uber would be compelled to treat all of its New Jersey drivers as statutory employees going forward. The Company will never voluntarily do that.
A further cruel irony awaits Uber (or any putative employer). If the Company cannot cut an acceptable deal with the Redetermination Auditor, the case will proceed to trial in the Office of Administrative Law (OAL), before a neutral Administrative Law Judge (ALJ), who is not a DOL employee. Even if the Company completely prevails before the ALJ, the Commissioner of Labor, the head of the agency that the Company has just beaten, then has forty-five days to sustain, modify, or reverse the ALJ decision. Any bets as to which option the Commissioner would choose?
Uber could then go through the New Jersey courts, starting with the Appellate Division but courts greatly defer to the position (and decision) of a State agency. Thus, it is very dangerous to take a case to OAL because even if you win, you may well, in the end, lose.
The end result, potentially, is that Uber has to change its business model or create some indicia of true employment. As one commentator has put it, there may be born a cadre of individuals known as “dependent contractors where there is some melding of the attributes of employee and independent contractor.
But, for sure, some revenue will flow to the State…