Independent Contractor Misclassification and Compliance News June 2026

As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations and developments surrounding these topics. Each month, we bring you the latest news stories from around the web.

Court Says Worker Is an Independent Contractor Under Federal Fair Labor Standards Act (FLSA) But an Employee Under New Jersey ABC Test

In 2021, the Trump Administration United States Department of Labor (DOL) issued a regulation setting for the standard for determining if a worker is an employee or independent contractor. Then the Biden Administration DOL rescinded it in 2024 and issued a new regulation.

The Trump Administration DOL is now rescinding the 2024 regulation and is in the process of promulgating a new rule. Throughout this back-and-forth, workforce experts reminded businesses that state laws were often more stringent than any federal regulations, and that they would be well advised to ensure compliance with applicable state requirements.

The wisdom of that advice is borne out by the recent case in which the court determined that a worker was properly classified as an independent contractor under federal law (more specifically, the Fair Labor Standards Act (FLSA)—but was misclassified and should have been treated as an employee under New Jersey law.

In this case, the workers were entertainers who livestreamed performances on a hosting platform. The platform allows entertainers to perform from any location. Entertainers must sign an agreement with the platform which says that the entertainers are independent contractors.

The court used a six-factor “economic reality” test under FLSA to determine if they were an employee or independent contractor under the Fair Labor Standards Act.

1. The degree of the alleged employer’s right to control the manner in which the work is to be performed;
2. The alleged employee’s opportunity for profit or loss depending upon his managerial skill;
3. The alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;
4. Whether the service rendered requires a special skill;
5. The degree of permanence of the working relationship; and
6. Whether the service rendered is an integral part of the alleged employer’s business.

The court reviewed these factors in this case and determined that the entertainers were independent contractors under the FLSA.

The court then reviewed the New Jersey classification test under which a worker is an employee unless the hiring entity satisfies all three prongs:

• A. Such 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; and
• B. 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; and
• C. Such individual is customarily engaged in an independently established trade, occupation, profession or business.

The court concluded that the entertainers were free from control (prong A) but were not outside the usual course of business of the platform and not outside of all of the places of business of the platform. Therefore, the platform did not satisfy prong B of the ABC test and they were deemed employees under New Jersey’s ABC test.

This is an unusual case for two reasons. First, the entertainers were independent contractors under federal law but employees under state law. Second, the determination of a “place of business” for the platform usually looks at physical (brick-and-mortar) buildings, which in this case, was extended to any location where the company’s core services are being executed.

The bottom line: Companies engaging independent contractors should take care to comply with both federal and state standards for classifying workers. And if they operate in states that uses the ABC test, they should consider where exactly the services are being performed.

For more information, check out our resources page on misclassification and compliance. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help.