'Fundamentally Flawed'
The Coalition for Workforce Innovation filed a 105-page public comment against New Jersey's proposed independent-contractor rule. A Q&A with attorney Camille Olson
Camille Olson is a partner at Seyfarth who serves on the law firm's National Labor and Employment Law Steering Committee. She also advocates on behalf of independent contractors through the Coalition for Workforce Innovation, which is how I got to know her. You may recall me quoting her in this article I posted in December, when I was trying to make sense of some data the U.S. Department of Labor released about independent contractors that seemed to be, well, inaccurate.
Olson, along with her fellow Seyfarth attorneys Richard Lapp and Kyle Winnick, wrote the 105-page public comment about New Jersey’s proposed independent-contractor rule that they just filed on behalf of the Coalition for Workforce Innovation.
This public comment urges the department to withdraw the proposed rule in its entirety or substantially amend it. You can read it in full here:
The Coalition for Workforce Innovation’s overall opinion of this New Jersey proposal is evident right from the start of this public comment, on page one:
“CWI emphasizes that any final regulation interpreting the ABC Test to determine a worker’s status under New Jersey law should reflect a modern, balanced, and legally sound framework that supports independent contractor relationships in today’s economy.
“The Proposed Rule does not.
“Contrary to good public policy, New Jersey case law, and federal law interpretations of relevant factors related to parts of the ABC Test, the Proposed Rule will have the effect of misclassifying independent workers as employees, and threatening their livelihoods and financial future, while restraining worker freedom and entrepreneurship, business development, and consumer access to goods and services within the State of New Jersey.”
Here are just some of the reasons why Olson says the proposed New Jersey rule falls short of being good public policy, in a Q&A based on CWI’s public comment.
Q&A with Camille Olson
CWI’s public comment states that: “independent contractor relationships are not disfavored relationships in New Jersey. To the contrary, both the legislature and courts have supported the development of industries that include independent contractor relationships as part of the industries’ business model.”
I think it’s important for people to understand what a disfavored industry is. That language refers to industries like tobacco or subprime loans, where the government has identified risks that require different treatment to protect people.
Why do you point out in CWI’s comment that independent-contractor relationships are not disfavored in New Jersey?
We pointed this out because the Proposed Rule fails to consider the benefits of independent contracting for workers, businesses, and consumers, as well as the expressed public policy by New Jersey legislatures to support industries, businesses, and workers in traditional and new independent contractor relationships.
The Department’s Notice of Proposal accompanying the Proposed Rule assumes that workers would benefit from being employees, even though survey research shows otherwise.
Numerous surveys have demonstrated that the vast majority of independent contractors choose to be, and want to remain, independent contractors. The vast majority of independent contractors, including those working in the online demand economy, value the freedom and flexibility an independent work engagement provides, because in many cases, they use independent contracting to either supplement their income from traditional employment and/or because they are in a profession where they can and do choose to be their own boss.
I know for a fact that what you’re describing is true, not only because so many years’ worth of studies and data show it, but also because I am very much one of those independent contractors. Happily so, for several decades now.
You also detail flaws with the proposed interpretation of the ABC Test’s prongs A, B and C, aligning in general with what this attorney from the National Federation of Independent Business and this attorney from the Littler firm wrote in their public comments.
Overall, I’m seeing a pattern that makes it seem like it’s going to be lawsuit city in New Jersey if this proposed rule goes through. The state may have to rename this thing the Full Attorney Employment Act of 2025.
The Department’s selective use of certain factors and examples, and omission of others, makes its interpretation of New Jersey’s caselaw fundamentally flawed from a legal perspective.
The Proposed Regulation, despite the Department’s statements, does not accurately reflect New Jersey Supreme Court precedent or its interpretive lineage. The Proposed Rule will likely lead to needless litigation as it does not provide clarity, consistency, or an accurate, even-handed application of New Jersey legal principles to either traditional or modern work relationships that independent workers enter into with New Jersey businesses.
CWI’s public comment goes into detail about the flaws you see in the proposed interpretation of each prong of the ABC Test. But you also provide a nifty summary for those of us who are not lawyers. What are the basics?
Under Prong A, the Proposed Rule states that control which stems from complying with legal rules is probative of employee status. Yet, New Jersey courts have specifically found that control which results from generally applicable rules and regulations is not probative of employee status. In 2019, New Jersey’s Appellate Division held that a law office’s supervision of an independent contractor paralegal did not constitute control because it stemmed from ethical obligations imposed by the New Jersey Bar. The Proposed Regulation’s statement that requiring a third party to comply with a legal requirement is an indicia of control cannot be squared with this New Jersey case law.
With respect to Prong B, New Jersey courts have expressly held that the location of a putative employer’s customer does not count as a “place of business” under Prong B. Yet, the Department still proposes a rule that would collapse the distinction between a business’s locations and its customer’s locations.
Finally, with respect to Prong C, New Jersey courts have held that if the worker has multiple streams of income, even if they are unrelated to the work performed for the putative employer, this tends to show that the worker is customarily engaged in an independently established trade, occupation, profession, or business. Yet, the Department still proposes a rule that would effectively ignore these facts, inconsistent with New Jersey law. The Proposed Rule improperly rewrites Prong C by requiring proof of both an independently established business and an independently established trade, occupation, or profession, even though the statute makes each of these alternatives sufficient on its own.
CWI’s public comment also details the findings from a 2020 study the coalition commissioned. It included a national survey of 600 self-identified independent contractors. Those people worked in technology jobs like web design and programming; professional services like legal advice and consulting; sales like real estate and marketing; personal services like hairstyling and fitness instruction; freelance communications like journalism and copywriting; creative design like photography and graphic design; app-based delivery like Doordash and TaskRabbit; ridesharing like Lyft and Uber; and non-app delivery like newspapers and grocery stores.
The findings were overwhelming that it’s easier than ever for people to be independent contractors, and that our laws should be changed to reflect this current reality.
An overwhelming percentage of independent workers surveyed—88%—agreed that advances in technology have made it easier for all people, regardless of their college education or background, to find well-paying and satisfying independent work opportunities that fit around their lives, rather than having to fit their lives around their employment.
Some 85% of independent workers surveyed said major reforms are necessary to employment laws to reflect today’s economy and support innovation, economic opportunity, and worker empowerment.
I don’t recall being surveyed as part of that study, but I would have fit right in with my responses, for sure.
Another thing you wrote in CWI’s public comment that really stood out to me is that “the prevalence of independent contracting is not an accident.”
Far too often, we’re all being told that what’s happening is a huge number of employees being misclassified as independent contractors. But years’ worth of data from the U.S. Bureau of Labor Statistics—as well as the state and federal results following years now of misclassification crackdowns—simply does not support that narrative.
Why do you believe the prevalence of independent contracting is not an accident?
Independent contracting increases businesses’ competitiveness. It allows smaller businesses access to specialized skills that they otherwise could not afford on a permanent basis. This allows small businesses to compete with larger ones, increasing competition and lowering prices for consumers.
In addition, technological advancements have reduced the barriers to entry in various industries by providing customers with direct access to new sources of products and services. This change, in turn, has pressured businesses to modify their business models, including their approaches to retaining and managing their labor force, in order to compete and remain viable.
To remain competitive in the face of technological change, businesses have turned to independent contractors, who are now seen as essential to improving business performance, such as increasing speed to market, increasing organizational ability, improving overall financial performance, and allowing firms to compete in a digital world where increasingly relevant, highly-skilled talent is in short supply.
You go on to write that for all these reasons, New Jersey’s proposed rule would not just harm independent contractors, but also would harm the economy and consumers.
There would be reduced job creation and small-business formation. There is a strong relationship between independent contracting, entrepreneurship, and small-business formation. For example, restricting independent work harms small technology startups that rely on independent workers.
New Jersey would also experience reduced competition and increased prices. Engaging independent contractors allows businesses to keep costs down. Curtailing their use will necessarily increase business costs, which will be passed on to consumers.
There would be sector-specific disruptions. Independent contracting is a primary business model in various important industries, such as construction, transportation, financial advice, and medicine. Limitations on independent contracting could create serious economic disruptions in these and other industries.
In addition, independent contracting allows businesses and workers to respond to changes in the economy, reducing “structural” unemployment. For example, independent contracting facilitates workers’ re-entry into the workforce after being laid off.
The economic benefits of independent contracting are substantial. Policies that make it more difficult for workers and businesses to enter into such arrangements would result in slower economic growth, lower levels of employment and job creation, and lower consumer welfare overall.
CWI’s public comment also makes a point that I’ve seen other experts make for years now—that independent contracting coexists with traditional employment. This is an important point, because opponents of legislation that’s intended to protect independent contracting often turn to fear-mongering language about everyone having to become self-employed and no traditional jobs being left.
That’s not what is happening at all, according to CWI’s public comment.
Independent contractors tend to use contract work to supplement their income.
For example, numerous studies have found that contractors use gig work, which by its nature is project-to-project work, to make supplemental income on an as-needed basis. One study by McKinsey in 2016, for example, found that 54 million to 68 million workers are turning to alternative work arrangements for secondary income.
Other research establishes that a large portion of the alternative workforce is intentionally engaged on a part-time basis, with many having another primary job that often includes benefits.
There is no evidence that traditional W-2 work arrangements are being supplanted by independent-contractor arrangements. In addition, contractors often use so-called “gig” work to mitigate income volatility. Being laid off or having hours cut in a traditional job creates an income and expense shock that gig work can help to buffer.
Another thing that CWI’s comment points out is that New Jersey’s proposed rule would not create any jobs for people who lose their independent-contracting income. I noted this same thing in the public comment that I wrote and filed on behalf of the grassroots coalition that I co-founded, Fight For Freelancers. The Labor Department’s own proposal states that it will not create any new jobs.
For New Jerseyans like me, that means the state is threatening the independent-contracting income I have right now, while simultaneously telling me it will not create any new job for me.
By promulgating a regulation that almost certainly would have the effect of narrowing who counts as an independent contractor under the applicable laws, the Proposed Rule would not provide most independent contractors with better pay or benefits, but would deny them the freedom and flexibility to set their own hours and be their own boss—the very reasons most of them prefer to work as independent contractors.
In fact, as you say, if the Proposed Rule became final, it could result in the loss of an income stream altogether, as companies will need to make difficult staffing decisions. The Proposed Rule does not address these significant consequences.
Well, I’m certainly grateful to attorneys like you who are addressing these consequences—which are, in a word, unacceptable. Thank you for all the work you’ve been doing to try and protect independent contractors like me.
Where can people learn more about the latest at your firm, Seyfarth?
We have a section of our website with all our latest news, along with links to various blogs and podcasts that people can follow. There are almost a dozen podcasts alone, on topics as wide-ranging as employee benefits and commercial real estate. One of the blogs is specific to the peculiarities of California’s employment law, which is of course is of real interest to independent contractors in the wake of Assembly Bill 5.