Worker Classification & ABC Test Flashcards

A gig-economy company argues its drivers are independent contractors because they set their own hours. Under the economic realities test, which counter-factor would MOST strongly support employee status?

Answer: The company's algorithm controls surge pricing, route suggestions, and driver ratings that affect continued access

Algorithmic control over pricing, ratings, and platform access constitutes meaningful behavioral and financial control that weighs toward employee status under the economic realities test.

Under New Jersey's ABC test for unemployment compensation, Prong A requires that the worker be free from control 'both under their contract of service and in fact.' The phrase 'in fact' means:

Answer: The actual working relationship must reflect independence, regardless of what any contract says

'In fact' means the actual day-to-day working relationship must demonstrate independence; a contract calling someone a contractor does not override the reality of how the work is performed.

Which of the following misclassification scenarios would trigger the highest penalty exposure for a payroll manager's employer?

Answer: Intentional misclassification with no 1099s filed and no VCSP participation

Intentional misclassification with failure to file required information returns and no participation in relief programs exposes the employer to maximum penalties, back taxes on both employer and employee shares, and potential criminal liability.

A worker performs accounting services for a CPA firm exclusively and has no other clients. Under Prong C of the ABC test, this arrangement most likely means the worker:

Answer: Fails Prong C because they lack an independently established business serving the market generally

Working exclusively for one firm without an independently established accounting practice available to other clients strongly indicates the worker fails Prong C of the ABC test.

Which federal law specifically prohibits employers from retaliating against workers who file Form SS-8 to determine their employment status?

Answer: There is no specific federal anti-retaliation provision for SS-8 filers

While general anti-retaliation protections under labor laws may apply in context, there is no single federal statute that specifically prohibits retaliation solely for filing Form SS-8.

A multistate employer must classify the same delivery drivers differently in California (ABC test) versus Texas (common law test). This scenario illustrates:

Answer: That state laws can impose stricter worker classification standards than federal law

States may impose stricter worker classification standards than federal law, meaning the same worker can be an employee under state law but potentially a contractor under federal standards.

For unemployment insurance purposes, most states that use the ABC test apply it to determine whether a worker is covered by the state UI system. If a worker is found to be an employee under the ABC test, the employer must:

Answer: Pay both the federal FUTA and state SUTA taxes on the worker's wages

If a worker is classified as an employee under the state ABC test, the employer owes both federal FUTA and state SUTA contributions on the wages paid to that worker.