This month’s legal developments include a key case decided in New Jersey that supports a less stringent application of that state’s ABC test for independent contractor (IC) status. In late April 2025, the New Jersey Labor Commissioner proposed regulations that would have made it even more challenging to meet the state’s strict ABC test for IC status. The proposed regulations provoked a firestorm of opposition from stakeholders including freelancers operating as ICs and businesses that rely on ICs as part of their business models. The publisher of this blog filed extensive comments critical of certain aspects of the proposed rule. One of our comments pertained to the manner in which the proposed regulations addressed the second part of the B prong of the ABC test, which we argued was not only contrary to existing New Jersey Supreme Court case law but, as drafted, would “foster the elimination of almost all independent contractors in this State.” Notably, as reported below in our summaries of seven key legal developments last month, an appellate court in New Jersey concurred with the publisher’s view, concluding that the Commissioner’s argument on the B prong was contrary to New Jersey Supreme Court case law. Regardless of whether the Commissioner heeds our comments and the comments of other stakeholders supporting IC status in New Jersey, many companies operating in New Jersey and elsewhere have used a process such as IC Diagnostics (TM) to structure, document, and implement their IC relationships in a manner that enhances compliance with even those laws containing the most stringent tests for IC status.

Cases (5 cases)

NEW JERSEY APPELLATE COURT DECISION UNDERMINES PROPOSED REGULATIONS ON TEST FOR IC STATUS. The New Jersey Appellate Division has affirmed a decision by the state’s Labor Commissioner concluding that a disc jockey (DJ) services company is liable for $45,000 in unpaid unemployment compensation and disability benefits contributions due to its misclassification of DJs as ICs instead of employees. The New Jersey Department of Labor and Workforce Development conducted an audit of the business, which provides DJ services for weddings, proms, and other events. The Labor Commissioner applied New Jersey’s three-part, conjunctive ABC test used to determine employee/IC status in the state. Applying the ABC test, the court concluded that the company failed to meet two of its three components. Although the court agreed with the Labor Commissioner that prongs A and C were not met by the DJ services company, the court held that prong B was satisfied. In a decision that undermines the current proposed regulations issued by the Labor Commissioner on the ABC test, the court rejected the Commissioner’s finding that the clients’ venues were the DJ services company’s “places of business” in light of New Jersey Supreme Court case law. As noted above, this ruling echoed the same argument we articulated in our publicly filed comments on the new proposed ABC regulation. ZJN, LLC v. New Jersey Department of Labor and Workforce Development, No. A-3983-23 (Super. Ct. App. Div. NJ Oct. 3, 2025).

ELEVENTH CIRCUIT ISSUES IC MISCLASSIFICATION OPINION REVERSING SUMMARY JUDGMENT IN FAVOR OF INSURANCE ADJUSTING COMPANY. The U.S. Court of Appeals for the Eleventh Circuit has reversed a federal district court’s grant of summary judgment that three insurance claims adjusters providing services during Hurricane Harvey were ICs and not employees under the federal Fair Labor Standards Act (FLSA). An outsourcing company provided licensed insurance adjusters to an association of wind and hail insurers in Texas. In 2017, three plaintiff adjusters were assigned to adjust claims arising from Hurricane Harvey. They later brought an action in federal district court against the outsourcing company and the association claiming that they were misclassified as ICs and were not paid overtime compensation for any week in which they worked in excess of 40 hours. Cross-motions for summary judgment were filed and the district court granted the company’s and association’s motions, concluding that four out of the six factors considered by the Eleventh Circuit when determining worker status under the FLSA favored the IC status of the adjusters. On appeal, the Eleventh Circuit reversed the grant of summary judgment and concluded that the district court failed to assess the economic reality of the relationship and whether the adjusters were economically dependent on the company and the association under the totality of the circumstances. After considering the evidence submitted to the court in the light most favorable to the adjusters (which is the standard on a motion for summary judgment), the appeals court found that there was evidence that five of the six factors favored employee status and overall suggested economic dependence. In those circumstances, the Eleventh Circuit concluded that summary judgment should not have been issued and that the adjusters are entitled to a jury trial on their claims. Galarza v. One Call Claims, LLC, No. 23-13205 (11th Cir. Oct. 10, 2025).

NEW JERSEY LABOR COMMISSIONER FILES IC MISCLASSIFICATION LAWSUIT AGAINST AMAZON REGARDING STATUS OF FLEX DRIVERS. The New Jersey Attorney General’s Office has filed suit in the name of the state’s Labor Commissioner alleging that Amazon.com and Amazon Logistics misclassified Flex drivers as ICs and not employees, in violation of various New Jersey wage and hour, benefits, and tax laws. Amazon sells and delivers products to consumers through its engagement of drivers who pick up packages from Amazon’s warehouses and stores to be delivered to its customers’ doorsteps. The complaint alleges that Amazon Flex was launched in 2015 to provide same- and next-day deliveries of products sold through the company’s retail platform. The complaint contends that the company’s website states that “[w]ith Amazon Flex, [delivery drivers] can deliver packages using your own vehicle, on your own schedule.” To support his IC misclassification claim, the Labor Commissioner argues that the company requires drivers to use the company’s app to complete training before providing services, prohibits drivers from negotiating their rate of pay, evaluates drivers’ performance, directs drivers to deliver packages in a specified time and manner through digital surveillance, collects information about drivers’ moment-to-moment activities, penalizes drivers whose deliveries are untimely, and requires drivers to comply with company policies and undergo background checks. While New Jersey’s test for IC status is one of the more stringent in the nation, it is nonetheless anticipated that Amazon will vigorously defend its Flex business model in this lawsuit, which likely will take years to litigate to a conclusion. Asaro-Angelo v. Amazon.com, Inc., No. ESX-L-008049-25 (N.J. Super. Ct. Oct. 20, 2025).

U.S. SUPREME COURT TO REVIEW TRANSPORTATION WORKER EXEMPTION UNDER FAA FOR INTRASTATE WORKERS DELIVERING GOODS TRAVELING IN INTERSTATE COMMERCE. The U.S. Supreme Court has agreed to review the scope of the transportation worker arbitration exemption under the Federal Arbitration Act (FAA) as it applies to distributors and workers regarded as delivery drivers. The case under review is the Tenth Circuit’s decision that distributors of products manufactured by a nationwide baking company qualified for the FAA’s arbitration exemption for interstate transportation workers. The Tenth Circuit held that the distributors were covered by the exemption to the extent they delivered the company’s baked goods, which were manufactured in other states, to stores retailing such products, even though the distributors themselves did not “physically cross state borders when delivering [the company’s] products from the warehouse to his customers.” The Supreme Court granted review to consider the following question: “Are workers who deliver locally goods that travel in interstate commerce – but who do not transport the goods across borders nor interact with vehicles that cross borders – transportation workers ‘engaged in foreign or interstate commerce’ for purposes of the Federal Arbitration Act’s § 1 exemption?” Flowers Foods, Inc. v. Brock, No. 24-935 (U.S. Oct. 20, 2025).

HOME HEALTH SERVICES COMPANY AND ITS FORMER AND CURRENT OWNERS FOUND LIABLE FOR $10 MILLION FOR IC MISCLASSIFICATION. California Attorney General Rob Bonta recently announced a $10 million judgment and permanent injunction against a company providing in-home caregiver services due to its misclassification of hundreds of workers as ICs instead of employees, in violation of California’s labor laws. According to a press release issued on October 2, 2025, by the AG’s office, a Los Angeles County Superior Court granted the AG’s motion for summary adjudication against Care Specialist HCS Inc. and its former and current owner-operators. The court’s judgment requires payment of over $10 million in restitution and civil penalties and includes a permanent injunction barring defendants in the future from improperly classifying employees as ICs. People of the State of California v. Cabrera d/b/a TLC Home Care Services, No. 23STCV 14203 (Super. Ct. Los Angeles County Oct. 2, 2025).

Administrative and Regulatory Initiatives (2 matters)

CAR DETAILING AND RENTAL CAR COMPANY SETTLES DISTRICT OF COLUMBIA IC MISCLASSIFICATION INVESTIGATION. The Attorney General for the District of Columbia has secured a settlement with a car detailing and rental car management company to resolve allegations that the company paid 84 workers less than the minimum wage and deprived them of overtime wages when they worked more than 40 hours in a week as a result of having misclassified them as ICs instead of employees. In a News Release issued October 7, 2025, the Attorney General reported that an investigation by his office had uncovered evidence that Unique On the Go Corporation had classified 84 of its District workers as ICs despite exercising sufficient control over them that they should be classified as employees under D.C. employment laws. The Press Release stated that as a result of this misclassification, the workers routinely made less than D.C.’s minimum wage, were never paid overtime wages when they worked over 40 hours in a week, and did not receive sick and safe leave under the District’s Accrued Sick and Safe Leave Law. The settlement between the parties includes a requirement that the company properly classify the D.C. workers as employees.

CALIFORNIA USES JOINT EMPLOYER LIABILITY TO ASSESS PENALTIES FOR IC MISCLASSIFICATION. The California Labor Commissioner issued a citation to Costco, Ryder Last Mile Inc., and Mega Nice Trucking LLC for $868,128 for IC misclassification and labor violations affecting 58 delivery drivers. According to a news release issued on October 30, 2025, the Bureau of Field Enforcement in the Labor Commissioner’s Office announced that it has issued citations as a result of an investigation commenced in July 2024. The investigation was prompted by two former Mega Nice Trucking employees, who filed complaints alleging wage theft and IC misclassification. Mega Nice Trucking is a subcontractor for third-party logistics companies, including Ryder Last Mile, which contracted with drivers to deliver large items from big box retailers across the San Diego region. The investigation reportedly revealed that drivers working under Mega Nice Trucking were not paid minimum wages or overtime pay and were not provided with legally mandated meal and rest breaks. The Labor Commissioner also concluded that Costco and Ryder Last Mile exercised both direct and indirect control over the delivery drivers by scheduling deliveries, mandating uniforms, enforcing specific protocols, and closely monitoring driver performance. According to the news release, these actions established a joint employer relationship with Mega Nice Trucking and allegedly made Costco and Ryder Last Mile equally liable for the IC misclassification and Labor Code violations. All three companies have appealed the citations.