Human Rights Watch Letter to New Jersey Department of Labor & Workforce Development

August 5, 2025

Mr. David Fish, Executive Director

Legal and Regulatory Services

Department of Labor and Workforce Development

P.O. Box 110, 13th Floor

Trenton, New Jersey 08625-0110

Re: Proposed New Rule Regarding Independent Contractors: N.J.A.C. 12:11 – Support 57 N.J.R. 894(a), Vol. 9 (May 5, 2025)

Dear Director Fish:

Human Rights Watch welcomes the opportunity to comment on the NJ Department of Labor and Workforce Development’s proposed rule codifying New Jersey’s statutory “ABC test” for determining independent contractor status (N.J.A.C. 12:11). Human Rights Watch is an international human rights organization that conducts research and advocacy in more than 90 countries around the world, including the United States. We work on a range of issues at the intersection of business, technology, and human rights, including the rights of workers in the app-based platform economy.

We write in strong support of the Department’s proposed rule N.J.A.C. 12:11. Based on our analysis of international human rights law and our research on the lived experiences of platform workers in the United States, this rule represents a critical step towards addressing systematic misclassification, whereby workers are treated as independent contractors despite performing work that meets the legal definition of employment. This harmful business practice denies millions of workers their rights and protections.

The ABC test is a legal standard used under New Jersey law to determine whether a worker is an employee or an independent contractor for the purposes of state labor protections. To qualify as an independent contractor, a worker must meet all three prongs of the test: they must (A) be free from control or direction, (B) perform work outside the usual course or place of the business, and (C) be engaged in an independently established business.

Misclassification deprives workers of many of their labor rights, undermines fair competition among businesses, and contributes to economic inequality. It also undermines the enforcement of laws intended to ensure decent working conditions.

In our investigation into labor rights violations in app-based work, published in May 2025, Human Rights Watch surveyed 127 platform workers in Texas and conducted in-depth interviews with 95 individuals working in rideshare, food delivery, and grocery shopping across seven major companies: Uber, Lyft, DoorDash, Instacart, Shipt, Favor, and Amazon Flex – many of which operate in New Jersey.[1] Our findings indicate that platform workers are routinely misclassified as independent contractors, excluding them from key protections such as wage and hour laws and access to social protection. Meanwhile, the companies that hire these workers evade obligations to contribute to unemployment insurance, Social Security, Medicare, and state-level insurance programs, as well as to comply with employment standards.

According to our survey, workers earned, including tips, an average of just $5.12 per hour after expenses, approximately 30 percent below the federal minimum wage for employees and 70 percent below a living wage in Texas. Seventy-five percent of workers we surveyed said they had struggled to pay for housing in the past year. Thirty-five percent said they couldn’t cover a $400 emergency expense. Over a third had been in a work-related car accident. Many said they sold possessions, relied on food stamps, or borrowed from family and friends to get by. A majority lacked health insurance or relied on Medicaid.

Misclassified platform workers also lack access to paid sick leave, workers’ compensation for job-related injuries, and safeguards against arbitrary dismissal. In our survey, 40 of the 127 workers reported having been “deactivated,” effectively terminated, by a platform through opaque, often automated systems, with little or no explanation and avenues for appeal. Nearly half of those deactivated were ultimately cleared of wrongdoing, raising serious concerns about due process and fairness.

Misclassification also strips workers of the right to organize and bargain collectively. Several workers we interviewed had attempted to unionize or protest unsafe conditions but faced legal and structural barriers in the absence of employee recognition.

At the same time, several platform companies have reported record revenues and profits. In 2024, Uber reported $43.9 billion in revenue and nearly $10 billion in net income, calling the fourth quarter its “strongest ever.”[2] DoorDash earned $10.72 billion in revenue, up 24 percent from the previous year.[3] Combined, these two companies’ market valuation exceeds $250 billion.[4] These financial gains are built in part on a business model that shifts operating costs and economic risks to workers, while circumventing tax and labor obligations through misclassification. Human Rights Watch estimates that misclassification of platform workers in rideshare, food delivery, and in-home services cost Texas over $111 million in foregone unemployment insurance contributions only between 2020 and 2022. In 2019, an audit of your Department uncovered that Uber and a subsidiary owed the state $530 million in back taxes that had not been paid for unemployment and disability insurance from 2014 to 2018, due to misclassification of platform workers.[5]

This is not a problem confined to one state. Many of the companies profiled in our research operate in New Jersey, where they use the same harmful misclassification practices.

Codifying the ABC test through the proposed rule and placing the burden of proof on the employer to treat such workers as employees would help address worker misclassification by ensuring clearer, more consistent application of the law and strengthening the Department’s ability to enforce employment protections.

Clarifying Longstanding Law

The ABC test is firmly rooted in New Jersey statute and affirmed by the state’s highest courts.[6] Yet in practice, its application has often been uneven and misclassification persists, and technology has reshaped work relationships. By translating legal standards into a clear and accessible regulatory framework, the Department’s proposed rule would fill this gap and help ensure proper classification under the law, allowing workers across New Jersey to access the human rights and labor rights to which they are entitled.

1. Prong A: Control and Direction

Prong A of the ABC test examines whether a worker has been and will remain free from control or direction in performing their work. The proposed rule (N.J.A.C. 12:11-1.3(a)) clarifies that this includes both actual control and the employer’s reserved right to control. Even partial or indirect control over how services are performed is incompatible with independent contractor status. The rule sets out a range of indicators in N.J.A.C. 12:11-1.3(c), such as whether the employer sets work hours, directs the means of performing services, restricts outside work, or provides training or supervision, that reflect the substantive nature of the working relationship.

This is very relevant for platform work. Human Rights Watch’s research finds that companies like Uber, Lyft, DoorDash, Instacart, and Amazon Flex exert extensive control over workers by not disclosing to them many of the system rules that govern their working patterns and environment. For instance, many platform companies unilaterally set pay rates and frequently adjust them via opaque algorithms. With the exception of Amazon Flex, all the platform companies that Human Rights Watch investigated use dynamic pricing models that adjust pay in real time, with no transparency for workers around the criteria or weighting of factors contributing to dynamic pricing algorithms, and no way to challenge these decisions. None of the seven US-based platform companies that Human Rights Watch investigated allow workers to have full knowledge of one of the fundamentals in a contract: their rate of pay, or to negotiate that rate.

Workers must also meet performance metrics to access assignments, including maintaining high customer ratings, accepting a minimum percentage of jobs, and completing tasks within set parameters established by their employer. Platforms rarely explain how these metrics are weighted or calculated. Falling below thresholds can result in fewer or less desirable assignments, reduced pay, or removal from a platform, creating algorithmic discipline that replaces direct human supervision – and leaves workers without an adequate complaints mechanism to challenge decisions that have a direct bearing on their income and livelihood.

These systems are intentionally designed to deprive workers of meaningful control over their schedules, routes, rates, and customer interactions. Platform workers cannot make informed decisions about their workloads or operations as an independent business or freelance contractor would. Instead, platform workers’ income is shaped not by entrepreneurial decision-making, but by algorithmic decisions set and managed by platform companies and shifting demand that is ultimately designed by the companies to benefit their bottom line.

These practices reflect multiple control indicators under N.J.A.C. 12:11-1.3(c), including employer-set hours or rates, performance standards, limits to external work, and reliance on proprietary tools or technology. In platform work, all are present. This rule would help clarify that platform workers are misclassified and should be classified as employees, because control, whether direct, indirect, manual, or algorithmic, precludes meeting Prong A.

2. Prong B: Work Outside the Usual Course or Places of Business

The Department’s proposed rule would clarify how Prong B of the ABC test applies to platform workers by defining “usual course of business” and “places of business” (N.J.A.C. 12:11-1.4). Under this prong, an employer must show that the worker’s services are either outside the company’s usual course of business, or entirely outside its places of business. The rule defines “usual course of business” as the revenue-generating activities a company routinely engages in (1.4(b)), and “places of business” to include mobile and decentralized worksites, such as vehicles or customer locations, where those services are delivered (1.4(e)–(g)).

This clarification is also relevant in the platform economy, where companies have sought to distance themselves from the very workers performing their core functions. Uber, Lyft, DoorDash, and Instacart all market themselves as transportation or delivery providers or tech companies, yet they rely entirely on gig workers to perform those services. These workers drive, deliver, and shop; the exact activities from which these companies derive revenue. Their work clearly falls within the company’s usual course of business.

They also perform these services in locations the rule identifies as “places of business” under 1.4(g)(3)(iii). While workers use their own cars or bikes, they do so through platform apps, following company procedures and engaging with customers in environments shaped by the platform’s rules. These mobile, customer-facing spaces are where services are delivered, and business is conducted.

Here too, the clarification would help address misclassification, as platform companies would fail both parts of Prong B. Gig workers perform the companies’ central functions, in locations that qualify as the company’s workplaces. The rule provides the example of rideshare drivers, clarifying that these workers are not tangential, they are the business.

3. Prong C: Independently Established Business

The Department’s proposed rule also provides clarification on Prong C, which assesses whether a worker is “customarily engaged in an independently established trade, occupation, profession, or business” (N.J.A.C. 12:11-1.5(a)). To satisfy this prong, the worker must operate a business that exists and can continue to exist independently of the specific service relationship at issue. This means a stable, self-sustaining enterprise (1.5(f)).

Our research finds that few, if any, platform workers would meet this standard. None of the workers we interviewed or surveyed set their own rates, advertise their services, maintain independent business infrastructure, or cultivate a distinct client base. Rather, they access work solely through apps that control pricing, rates of pay, assign jobs, process payments, and retain unilateral control over deactivation. These are not hallmarks of independent entrepreneurship, they are features of contingent labor subject to control.

Some platform workers may choose to register as an LLC or purchase additional liability insurance. But these are not indicators of real independence. The proposed rule rightly clarifies that registering a business, holding insurance, or working for multiple companies does not in itself demonstrate independent contractor status, especially when such steps are encouraged or required by the employer (1.5(g)-(h)).

Many platform workers use a single platform for the bulk of their income, with no parallel revenue streams and no ability to absorb or pass on operating costs like gas, parking, or safety gear. Most cannot negotiate rates or offer services to customers independently.

Prong C therefore also offers helpful criteria to address misclassification, as the realities of platform work stand in contrast to the standards set out in the rule, including setting one’s own pay (1.5(b)(6)), maintaining a visible business presence (1.5(b)(7)), and serving multiple meaningful clients (1.5(b)(2)).

Elevating Substance Over Form

The Department’s proposed rule rightly affirms that employment status must be based on the actual dynamics of the working relationship, not on contracts or tax filings (N.J.A.C. 12:11-1.6(a)). The rule states that neither a 1099 form nor an “independent contractor” agreement is determinative in assessing employment status (1.6(b)–(c)). This clarification is especially important where workers lack bargaining power and where companies structure relationships to avoid responsibility, not reflect actual conditions.

Human Rights Watch research shows that platform companies routinely rely on standardized agreements and 1099 tax filings to claim workers are independent contractors, even as they retain unilateral control over core aspects of the job. Workers we interviewed did not have the ability to negotiate contracts, they accepted standardized terms through app interfaces, often without a clear understanding of their legal significance. Many told us they felt they had no alternative if they wanted to work for a given platform.

By codifying a substance-over-form approach, the proposed rule strengthens the enforcement of worker protections and ensures that companies cannot sidestep their obligations through formalities. It grounds the ABC test in the real-world dynamics of control, dependence, and economic power.

Human Rights Watch thanks the Department for its leadership in advancing this rule. We strongly support its adoption and view it as a vital step toward protecting the rights of platform workers.

Sincerely,

Lena Simet

Senior Researcher and Advocate

Economic Justice and Rights Division

Human Rights Watch