New states are adopting provisions that pertain to independent contractors vs. employees.
Just when you thought that the California ABC test would stay within that state’s borders comes news that the states of New York and New Jersey are considering adopting some of the same provisions that pertain to the qualifications of independent contractors versus employees. In an article in The Wall Street Journal on December 6, various state legislators in New York are quoted about how they might impose some of the same regulations, although some comment that they felt California went too far.
The ABC test is a test to determine whether a person is an employee or an independent contractor for the purpose of determining the state unemployment tax.
The California ruling found that a worker could only be an independent contractor if each of these three factors was met:
The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
The worker performs work that is outside the usual course of the hiring entity’s business.
The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Behind this is not a directed attack on residential brokerage independent contractor status but more focused on workers in the gig economy—like Uber and Lyft drivers. Unfortunately, the same regulations don’t differentiate many industry’s independent contractors from those they most want to target.
We wrote in the past that state legislators might come after the independent contractors of ours (and others) industries in the search for tax revenue, licensing fees, more control, and lobbying monies from those affected by the regulations. It looks like this trend is not going away.