The ABC Test Defense

New Jersey's acting Labor Commissioner says no matter what happens with the independent-contractor rule, this troubling regulatory language will remain.

Last week, acting New Jersey Labor Commissioner Kevin Jarvis gave testimony before the state Senate Budget and Appropriations Committee. An issue that came up several times was the independent-contractor rule that the state Department of Labor & Workforce Development proposed during the administration of Governor Phil Murphy, and that new Governor Mikie Sherrill has paused to reconsider.

Since acting Labor Commissioner Jarvis has not yet had his confirmation hearing, this was our first chance to hear him speak somewhat at length about this policy area.

We still don’t know what Governor Sherrill plans to do with the proposed rulemaking, but it’s fair to say after hearing Jarvis’ testimony that we do now have some insight into how the Sherrill administration might attempt to defend imposing what experts say would be the most restrictive anti-independent contractor regulatory language in the nation, creating an existential threat to the very concept of self-employment in my home state.

We also have an idea of how several powerful Democrats in the majority party plan to address—or not address—this policy problem as well.

The Case Law Argument

Republican state Senator Declan O’Scanlon—who has (thank goodness) sponsored a concurrent resolution that would invalidate the Labor Department’s proposed independent-contractor rule—asked acting Labor Commissioner Jarvis a pretty basic question about the proposal and the thousands of public comments filed in opposition to it.

Senator O’Scanlon requested an update on the status of the proposed rulemaking, and asked Jarvis whether he was open-minded, based on the widespread opposition, about changing the proposal.

That simple question resulted in some noticeable tap dancing.

First came a little jig by Committee Chairman Paul Sarlo, a Democrat who previously made clear in writing that he only wants to protect members of the financial services community from overly restrictive independent-contractor policy, and who seems to think it’s funny how New Jersey’s government kills women- and minority-owned small businesses with regulations.

Watch how Sarlo interjects after O’Scanlon asks Jarvis that very basic question about the rule proposal’s status, and about whether Jarvis is open-minded to changing the proposal. It appears as if Sarlo is reminding Jarvis of whatever they discussed prior to the hearing—like a director helping an actor remember his lines:

After that, acting Commissioner Jarvis answered Senator O’Scanlon’s question in ways that any subject-matter expert could have challenged, and in ways that belied what appears to be real concern about calls for New Jersey to abandon the ABC Test altogether, as the regulatory language becomes increasingly weaponized against legitimate independent contractors all across the nation.

Among other things, Jarvis claims that the proposed new rule is based on 90 years of case law—and then repeats, numerous times, that New Jersey’s Labor Department will be sticking with the ABC Test no matter what happens with regard to the proposed rulemaking:

Nobody at this hearing even asked Jarvis whether New Jersey’s Labor Department was considering abandoning the ABC Test regulatory language, though quite a few of us, including me, have urged the state to do just that. The fact that acting Commissioner Jarvis so forcefully defended keeping the ABC Test felt like listening to a Shakespearean character who gives away the real heart of the game: Jarvis doth protest too much, methinks.

As to the claim that 90 years of case law points toward codifying New Jersey’s proposed rule, I’m not a lawyer like acting Commissioner Jarvis is, but we’ve all seen these kinds of claims about case law end up falling apart again and again at the federal and state levels, for years now.

At the state level, in California, there were suggestions of judicial activism in forcing a weaponized version of the ABC Test into the law, as described by members of the California Advisory Committee to the U.S. Commission on Civil Rights:

“In 2018, the California Supreme Court decided Dynamex v. Superior Court, a classification case. None of the Dynamex parties proposed the adoption of a brand-new test for classification when the case was briefed or in the lower courts. Long after the case had been briefed, and just weeks before oral argument, the California Supreme Court invited the parties to submit letter briefs on whether it should adopt a new test. Less than three months after oral argument, the California Supreme Court, without prompting from the litigants, unilaterally and retroactively, imposed the ‘ABC Test’…”

Here in New Jersey, as I explained in my report “Extremism vs. Entrepreneurism,” our state-level courts were swayed by Governor Murphy’s misclassification task force claims that included numerous instances of mischaracterized statistics and data. New Jersey’s courts were also swayed by the thinking of former federal Wage and Hour Administrator David Weil, who, my report details, has written for decades about independent contractors being a fundamental challenge to unionism, and who—much like New Jersey’s Labor Department is attempting today—tried to reinterpret existing regulatory language in ways that would restrict self-employment.

I wrote:

“The questionable Governor Murphy Task Force report that’s based on mischaracterized data and research, as well as the extremist thinking of David Weil, influenced New Jersey’s Supreme Court in a case about independent contractors—a case that the Labor Department then turned around and cited when proposing its independent-contractor rule in 2025.”

Combine those things happening in the California and New Jersey courts, and you realize that in two of the most active freelance-busting states, we have questionable rulings about regulatory language that seeks to restrict independent contracting.

On top of that, at the federal level, the U.S. Labor Department during the Biden administration noted that it could not impose the ABC Test through a regulatory rulemaking change without a U.S. Supreme Court ruling or an act of Congress. And when Congress, under Democratic Party control, tried to do just that with the Protecting the Right to Organize Act that would have injected California’s version of the ABC Test into federal labor law, several Democrats joined with Republicans to block it—citing concerns about legitimate independent contractors getting hurt.

Also at the federal level, the U.S. Labor Department under the first Trump administration explained in 2021 how its team reviewed case law in this policy area going back to 1975. That review, while not specifically about the ABC Test, found that while certain court rulings do lean one way or the other on employee classification based on a number of factors—meaning it’s possible to cherry-pick whatever regulatory language you want from various court cases going back decades—there was a “remarkably consistent trend” where in almost every case, if only two regulatory factors were the focus, then the court ruled the same way on proper classification almost every single time.

Those two factors are what’s known in layman’s terms as control and opportunity:

• Is the hiring entity exerting control over the individual, making the individual an employee, or is the individual free to work whenever, wherever and however she pleases, making her an independent contractor?

• Does the individual have the opportunity to earn more based on initiative or investment, with “no” meaning the individual is likely an employee, and “yes” meaning the individual is probably an independent contractor.

The U.S. Labor Department wrote in 2021:

“These two findings imply that whenever the control and opportunity factors both pointed to the same classification—whether employee or independent contractor—that was the court’s conclusion regarding the worker’s ultimate classification. In other words, the Department did not uncover a single court decision where the combined weight of the control and opportunity factors was outweighed by the other economic reality factors. In contrast, the classification supported by other economic reality factors was occasionally misaligned with the worker’s ultimate classification, particularly when the control factor, the opportunity factor, or both, favored a different classification.”

The currently proposed U.S. Labor Department rule would take the federal agency back to focusing primarily on those two core factors to determine independent-contractor status. So would legislation that’s currently before Congress, called the Modern Worker Empowerment Act.

These efforts, according to former U.S. Labor Commissioner Eugene Scalia and current U.S. Congressman Kevin Kiley, R-California, are direct responses to what we are enduring in states where, as Scalia wrote, “liberal activists and politicians have tried to drastically curtail the recognition of independent contractors.”

With all of that in mind, the testimony that New Jersey acting Labor Commissioner Jarvis gave, stating that New Jersey’s currently proposed independent-contractor rule is based on 90 years of case law, is well worth debating.

Examples, Please

I was also pleased to see New Jersey state Senator O’Scanlon push acting Labor Commissioner Jarvis to provide evidence of people going to the Labor Department and claiming that they didn’t realize they were working as independent contractors.

Here is that exchange:

The reason I’m happy to see Senator O’Scanlon request this information is because we heard similar claims about the scope of employee misclassification out in California that either never were supported with evidence, or that have since been outright debunked.

Here in New Jersey, claims that Governor Murphy’s administration made repeatedly about the scope of employee misclassification have also failed to pan out.

And perhaps most important, according to all of the oral testimony and thousands of written public comments submitted to New Jersey’s Labor Department, there are zero people being unknowingly classified as independent contractors.

You can download and read here the eight (yes, only eight out of about 9,500) public comments that individuals supporting the proposed rule change filed. Not a single one of them says the person was unknowingly working as an independent contractor.

In fact, the vast majority of public comments and testimony that’s on the record from independent contractors is opposed to the rulemaking. You can read key passages from some of the more powerful comments in my “Extremism vs. Entrepreneurism” report here.

Senators Sarlo and Johnson

One of my biggest frustrations during all these years of fighting to stop freelance busting is that lawmakers often have no idea who independent contractors are and how we earn a living, or if they do, they simply pretend we don’t exist as they push forward with policy that threatens to destroy our livelihoods.

We have seen this problem repeat at the state and federal levels alike, and it was, unfortunately, on display again last week in New Jersey.

Example one: Watch as committee Chairman Sarlo and Acting Labor Commissioner Jarvis banter about how, in a state where an estimated 1.7 million people earn some or all of our income as independent contractors across hundreds of professions, the only people who might be legitimately self-employed are people who already have traditional jobs and then add side hustles to them:

This whole concept that Senator Sarlo articulates is utter nonsense. Tens of millions of Americans happily earn all or most of our income as independent contractors, without simultaneously holding down a traditional job. Quite a lot of us earn more than $100,000 a year this way, and fewer than 1 in 10 of us say we would prefer a traditional job.

Senator Sarlo’s mother’s handymen are not a representative sample of the New Jerseyans whose livelihoods are at stake with this independent-contractor rule.

Example two: Watch this exchange between Senator Gordon Johnson, a Democrat who also serves as chairman of the New Jersey Senate Labor Committee, and acting Labor Commissioner Jarvis:

Numerous things are frustrating about that exchange.

First is the fact that key representatives of the financial services industry and real-estate industry wrote extensive public comments explaining precisely how the proposed independent-contractor rule could harm them. Here’s a snippet from the public comment filed by Prudential Financial, as highlighted in my “Extremism vs. Entrepreneurism” report:

“[T]he Proposed Rule, as drafted, will upend years of established law permitting independent contractors in the State of New Jersey, especially in highly regulated professional industries like insurance, financial services, and securities. Most importantly … we believe that such a significant change will negatively impact New Jersey consumers by severely limiting, if not eliminating, certain distribution channels through which consumers obtain advice and access insurance and investment products that provide critical financial protection.”

There are also well more than a thousand opposition comments from financial services professionals alone—a figure we know because the state Labor Department admitted that about 1,200 of their written public comments were initially omitted from the process altogether. And some of the most powerful speakers we all heard oppose the rule proposal in person at the public hearing last summer were independent contractors in the financial services industry, including this financial adviser:

After that public hearing, New Jersey’s Legislature passed a law to try and protect real-estate agents from this regulatory mess—a move that would not have been necessary if there was no problem with the proposed rulemaking. New Jersey state Senator Joe Pennachio, a Republican, noted in a press release that the intent of the new law was to let real-estate agents “keep their independence.”

Beyond that, Senator Johnson saying at the end of that video clip that he had heard from a few kinds of professionals—real-estate agents, financial planners and insurance agents—is probably true, but it’s far from the whole truth. He introduced legislation that would also protect certain kinds of truckers as independent contractors, yet another group that made its voice loudly heard at the public hearing and in the written public comments.

And, beyond that, I personally took a half day off work and drove more than an hour each way to meet with Senator Johnson and his staff at his office about all the many kinds of independent contractors who are caught up in this regulatory madness. I explained how California’s experience has taught us all that carveouts for favored industries with powerful lobbyists are not the answer. I also emailed Senator Johnson my “Extremism vs. Entrepreneurism” report, which includes a list that grassroots advocates compiled of the more than 600 affected professions in California.

You may also recall my testimony before New Jersey’s Senate Labor Committee this past winter, when I looked Senator Johnson in the eye and said this:

How many times, and in how many ways, do we have to say these things before all of our elected and appointed officials will hear us?

I am deeply grateful to elected officials like Senator O’Scanlon who are listening to the people of New Jersey, treating all of us who are self-employed with respect, and trying to help us overcome these relentless, remorseless attacks against some of the most entrepreneurial people in our state.

It’s my hope that despite some of the things we heard at this committee hearing last week, rational thinking will ultimately prevail, and Governor Sherrill will abandon the proposed independent-contractor rule.

There is still time for our government here in New Jersey to do the right thing and be more accountable to the people it is supposed to serve.