Nov 18, 2019

Independent contractor bill reported out of committee

A bill that could fundamentally change the way businesses classify workers was reported out of the Senate Labor Committee Nov. 14.

The legislation, S-4204, would make small, but significant changes to the test that businesses should apply to workers whom they wish to designate as independent contractors—colloquially known as the ABC test.

Under the current ABC test, a worker can only be classified as an independent contractor if:

A. The individual has been and will continue to be free from control or direction over the performance of the service, both under the individual’s contract of service and in fact; and

B. The service is either outside the usual course of the business for which the service is performed, or the service is performed outside of all the places of business of the employer for which the service is performed; and

C. The individual is customarily engaged in an independently established trade, occupation, profession or business.

If any of the three prongs of the ABC test are not met, than a worker should be designated as an employee, and not an independent contractor.

The legislation would make changes to B and C of the current test. Under B, no longer would a business use the fact that workers are performing their duties outside of all the places of business of the employer for which the service is performed. Instead the only factor would be whether the service is outside the usual course of the business for which the service is performed.

This could significantly limit the ability of businesses to designate a worker as an independent contractor as only workers who are engaged in work that is unrelated to the work of the business could be legally designated as such.

For example: A law firm could designate a landscaper as an independent contractor as the landscaper is not engaged in a service in the usual course of the business (i.e., the practice of law). However, the firm could not hire an attorney as an independent contractor because the services he or she would perform would not be outside of the usual course of business of a law firm.

Under new proposed C, the individual must be engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the work performed.

This legislation is sponsored by the Senate President Stephen Sweeney, D-3. It will now go to the full Senate for further consideration.