Court Finds Streamers Are Employees Under New Jersey Law Despite Independent Contractor Status Under The FLSA

Seyfarth Synopsis: The District of New Jersey held that performers on a streaming platform are employees under New Jersey law despite being independent contractors under the Fair Labor Standards Act (“FLSA”), underscoring how the so-called “ABC” test more narrowly defines independent contractors.

In a significant decision highlighting the stringent nature of New Jersey’s ABC test—and its impact on the relationship between online platforms and content creators—the U.S. District Court for the District of New Jersey held that performers on an adult streaming platform were employees under New Jersey’s ABC test, despite qualifying as independent contractors under the FLSA’s “economic realities” test.

The case involved a class action lawsuit brought by adult performers on a streaming platform against its parent company (the “Platform”) under the FLSA, the New Jersey Wage and Hour Law, and the New Jersey Wage Payment Law. Plaintiffs alleged that they were improperly classified as independent contractors and, as a result, were denied full pay and benefits. Performers on the Platform livestreamed content and were free to set their own schedules and rates, as well as perform on competitors’ websites. The Platform required performers to sign “Performer Agreements,” which stated that they were independent contractors and imposed certain rules, with violations potentially resulting in suspension or termination of their accounts.

The FLSA Economic Realities Test:

Plaintiffs’ FLSA claims were analyzed under the six-factor economic realities test, which requires balancing the factors to determine whether the relationship reflects employment or independent contractor status. The court emphasized that no single factor is dispositive and that the analysis must consider the totality of the circumstances.

Applying this test, the court concluded that the performers “function[ed] as independent contractors rather than statutory employees entitled to FLSA protections.” Although three factors weighed in favor of independence and three in favor of employment, the court gave particular weight to the performers’ control over the timing, pricing, and location of their streams, as well as their ability to stream simultaneously on competing platforms.

 The New Jersey ABC Test:

The court evaluated the remaining state law claims under New Jersey’s ABC test. This three-part test examines whether: (A) the individual is free from the employer’s control or direction; (B) the individual performs work outside the employer’s usual course or place of business; and (C) the individual is customarily engaged in an independently established trade, occupation, profession, or business.

Unlike the multi-factor economic realities test, the ABC test is a conjunctive test requiring the employer to satisfy all three prongs to rebut the presumption of employment. The court emphasized the “rigid” and “unyielding” nature of this standard.

While the court found that the performers exercised sufficient control over their work so that the Platform could satisfy Prong A, it held that the Platform failed to establish Prong B. Specifically, the court concluded that the performers’ work was not outside the Platform’s usual course or place of business. The court found that “Performers [were] integral to Defendants’ business, rendering operations impossible without them.” Additionally, the court adopted a broad interpretation of “place of business,” holding that the Platform’s business “is not bounded by brick-and-mortar walls” but extends to its proprietary digital infrastructure. As a result, the performers operated within the Platform’s place of business.

Because failure to satisfy even one prong of the ABC test is dispositive, the court held that an employment relationship existed and declined to analyze Prong C.

Key Takeaways

This decision highlights the significant differences between the FLSA’s economic realities test and New Jersey’s “rigid” and “unyielding” ABC test. It also demonstrates how the same set of facts can yield different outcomes under these standards, as well as the challenges employers face in meeting their burden under New Jersey law. The ruling may have far-reaching implications for online companies operating in New Jersey and in other jurisdictions that utilize an ABC test.

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