Businesses using independent contractors (ICs) that reside in any state that has a so-called ABC test to determine a worker’s IC status, including all companies that operate with ICs on a nationwide basis, may be asking themselves if they need a legal reset of their IC relationships after a recent decision by a New Jersey federal district court. The case involves New Jersey entertainers that livestream their performances on a hosting platform. The court first found that the performers were legitimate ICs under the “economic realities” test of the federal Fair Labor Standards Act (FLSA). But the court next found that the streamers had been misclassified as ICs under New Jersey’s ABC test and were therefore entitled to minimum wage as “employees” under the state’s wage and hour law. The New Jersey ABC test presumes workers to be employees and not ICs unless, among other things, the businesses can show that the workers perform services “outside of all of the places of business of the enterprise.” In the court’s view, the streamers “are effectively performing services within the virtual footprint of the enterprise” because the digital platform functions as a “commercial venue where the business operates.” Prior to this decision, such places of business were “brick and mortar” locations, not electronic platforms. Unless reversed on appeal, this decision may negatively impact businesses that use ICs residing in New Jersey or other states with similar ABC tests. Because so many businesses use electronic systems in their interactions with ICs, prudent companies may wish to re-document and re-implement their IC relationships using a process such as IC Diagnostics™.

The Streaming Arrangement

The plaintiff is an adult entertainer that livestreams her own performances on Streamate.com, a hosting platform managed and operated by defendant ICF Technology, which is owned by co-defendant Accretive Technology Group, both of which are Washington state corporations. Streamate permits performers to access and stream their performances on the platform from literally any location with internet access.

Potential customers view the performers’ livestream or uploaded content and then chat with performers before choosing to purchase their pre-recorded content. Performers and Streamate share in the fees paid by a particular customer. 

The Class and Collective Action Lawsuit

The plaintiff, who resides in New Jersey, filed a class and collective action complaint under New Jersey state law and the FLSA, claiming that by retaining a portion of the online “tips” received from customers, the plaintiff and other performers on the platform receive less than the state minimum wage for hours worked.

The court certified the case as a class action under state law and a collective action under the FLSA for approximately 385 New Jersey performers. Following discovery, both the plaintiffs and defendants filed competing motions for summary judgment. On May 29, 2026, the court issued its decision on the motions. Tomasello v. ICF Technology, Inc., No. 23-3759 (D.N.J. May 29, 2026).

The Court’s Decision on the FLSA Claim

The district court first addressed the FLSA claim and applied the six-factor economic realities test governing courts in the Third Circuit.

The court concluded that three factors favored IC status and three factors favored employee status. Those favoring IC status were:

• The degree of the company’s right to control the manner in which the work is to be performed;
• The worker’s opportunity for profit or loss depending on the amount of their investment and management skills; and
• The degree of permanence of the working relationship.

The factors favoring employee status were:

• The parties’ relative investments in equipment or materials required for the work or the employment of helpers;
• The level of special skill of the worker; and
• Whether plaintiffs’ services are an integral part of defendants’ business.

With an equal number of factors favoring each status, the court examined the totality of the circumstances and concluded that the performers “operate as independent economic entities in business for themselves, rather than as dependent employees.” In particular, the court focused on the fact that the performers “generally exercise comprehensive control over all meaningful aspects of their work, independently dictating the specific timing, location, and manner of their broadcasts.” It further noted that the performers “actively leverage their personal business acumen to manage critical commercial operations … [including] independently directing their own digital marketing strategies, choosing third-party advertising venues, setting individualized pricing thresholds, and selecting the distinct content features integrated into their live broadcasts.” In the court’s view, this constituted a “lack of economic dependence.”  It therefore held that under the FLSA, plaintiffs “function as independent contractors rather than statutory employees entitled to FLSA protections.”

The Decision Under the New Jersey ABC Test

The court noted that, “[u]nlike the flexible, multi-factor federal framework, the [New Jersey Wage and Hour Law and the Wage Payment Law] command the application of the unyielding, statutory ABC test,” where all three prongs of the test must be established by the business to establish IC status.

The first prong of the ABC test is whether the “individual has been and will continue to be free from control or direction over the performance of such service, both under his [or her] contract of service and in fact.” The court concluded that “because Plaintiffs operate free from control both on paper and in practice, Defendants have successfully satisfied Prong A.”

The second prong of the ABC test is two-part, and a business needs to satisfy only one part of the following: “such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed.” The court concluded that the first part cannot be established by the defendants, determining that “performers are integral to Defendants’ business, rendering operations impossible without them.”

As to the second part of the B prong, the court began its analysis by stating:

[U]nder New Jersey law, an enterprise’s ‘place of business’ is not bounded by brick-and-mortar walls; it extends to any proprietary digital infrastructure that serves as the primary commercial venue for the company’s operations. See Portillo, 606 F. Supp. 3d at 93 (“where [the defendant] ‘conducts business’ necessarily extends beyond the walls of its own facilities”). Thus, an enterprise’s “place of business” under Prong B includes any location where the company’s core commercial services are actively being executed, meaning physical brick-and mortar headquarters do not define the limits of the workplace.

The court further stated that the Streamate website “is not a passive internet utility; it is a highly integrated, proprietary virtual workplace where customers are aggregated, financial transactions are executed, and live content is distributed and policed.”  The court concluded that the defendants had failed to satisfy the second part of the B prong, stating: “Because the digital platform functions as the indispensable commercial venue where the business operates, the services are not performed ‘outside of all places of business’ of the enterprise; by logging into Streamate, Plaintiffs are effectively performing their services within the virtual footprint of the enterprise.”

The court noted that because Prong B was not met, it need not examine Prong C (whether the worker is customarily engaged in an independently established trade, occupation, profession or business).

Analysis of the Court’s Holding Under Prong B

The district court decision appears to be at odds with a governing New Jersey Supreme Court decision on the second part of the B Prong: Carpet Remnant Warehouse, Inc. v. New Jersey Department of Labor, 126 N.J. 567 (1991). In that oft-cited case, the Supreme Court analyzed the Labor Commissioner’s argument that the defendant’s places of business “may broadly be said to extend to every geographic point of [carpet] installation” where a customer is located. The Court stated that “[u]nder that definition of ‘places of business,” for a person to satisfy the B standard’s second alternative would be practically impossible.”  The Court concluded: “In our view, that phrase refers only to those locations where the enterprise has a physical plant or conducts an integral part of its business.”

In a November 12, 2025, blog post, we pointed out that an October 2025 decision by the Appellate Division of the New Jersey Superior Court, relying on the Carpet Remnant Warehouse opinion, rejected the labor commissioner’s finding that that client venues where disk jockeys provided their services were each a “place of business” of the company that booked weddings, proms, and other events. The court stated that the commissioner’s reasoning — that client venues were equivalent to the booking agency’s “places of business” because an integral part of the booking agency’s business was the performance of services by the DJs at client venues — was an overly expansive interpretation that would make it “practically impossible” for the booking agency to satisfy the second part of the B prong of the ABC test.  

Many businesses today use an electronic program or platform to facilitate services by legitimate ICs. This new federal court decision not only seems to deviate from governing judicial authority in New Jersey but also, if not reversed, would likely open the door to protracted litigation over whether an electronic system in use by a business is the functional equivalent of a place of business. We anticipate that the defendants will appeal this decision in due course to the U.S. Court of Appeals for the Third Circuit, as there may well be valid grounds supporting reversal.