Amendments to NYC Law Would Codify the ABC Test

Wrapped up in the New York City Council’s sweeping new legislative package, dubbed the “NYC Essential Workers Bill of Rights,” is Introductory Bill No. 1926 (Int. No. 1926). Int. No. 1926 would expand New York City’s Earned Sick and Safe Time Act (ESSTA) to cover many workers currently classified as independent contractors by introducing the so-called “ABC” test for determining who is an independent contractor and thus excluded from ESSTA coverage. The “ABC” test for determining independent contractor status is much more restrictive than the common law test traditionally used in New York, and therefore results in fewer workers being classified as contractors, and more classified as employees.

Specifically, the bill proposes to amend the definition of “employee” under the ESSTA to create a presumption that:

any person providing labor or services for remuneration within the city of New York for more than 80 hours in a calendar year . . . shall be considered an employee, unless the hiring entity demonstrates that all of the following conditions are satisfied:

  1. The person is free from the control and direction of the hiring entity in connection with the performance of the labor or services, both under the contract for the performance of the work and in fact;
  2. The person performs labor or services that are outside the usual course of the hiring entity’s business; and
  3. The person is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the labor or services performed.

The proposed NYC bill explicitly exempts certain categories of workers from its presumption of coverage.  These include:

  1. hourly professional employees;
  2. city, state, and federal governmental employees; and
  3. certain work study and scholarship student employees.

Employers newly subject to NYC ESSTA by virtue of this amendment would be required to provide notice of this law to impacted workers formerly classified as independent contractors within 60 days of the law’s enactment date.   

As currently drafted, Int. No. 1926 would be effective immediately and would be retroactive to January 1, 2020.  Notably, ordinarily to be eligible for ESSTA leave an employee must be employed for 120 days before they begin to accrue sick leave.  Int. No. 1926 would permit covered workers to begin accruing ESSTA leave immediately.

Significance of this Amendment

If enacted, Int. No. 1926 would grant earned sick and safe time leave (of up to 40 hours) to persons currently classified as independent contractors and freelancers.

The ABC test most recently received attention when it was codified into California law in September 2019, as part of California’s Assembly Bill 5 (AB 5).  AB 5 dramatically reshaped California’s workforce by exposing many workers to potential reclassification. 

Since the passage of AB 5, employers have been watching to see whether a similar bill would sweep east towards enactment. Efforts to adopt or expand the use of the ABC test by way of state legislation are also currently pending in Rhode Island, Pennsylvania, Washington and Minnesota.1 If enacted, Int. No. 1926 would be the first bill to codify the strict ABC test into a New York statute and could ultimately have implications far beyond sick leave.  We may expect forthcoming regulations to include similar “presumptions” of employee status moving forward, and we may see similar efforts to introduce the test on a state-wide basis. 

What is This Bill’s Current Status?

As of this publishing, this bill is not yet law, but is moving rapidly.  The bill was introduced during the April 22 meeting with the full city council and was assigned to the Committee on Civil Service and Labor.  The Committee on Civil Service and Labor has scheduled a public hearing to debate the bill on May 5. Following this debate, the bill will then be sent to the full council to be considered and voted on, where it must once again pass by majority vote.  If passed, the bill will then be presented to the mayor who will have 30 days to either sign the bill into law, veto the bill or take no action.  If the mayor vetoes the bill, it will be sent back to the council.  If this occurs, the council can override the mayor’s veto with a 2/3 vote.  If the mayor does not sign or veto the bill within 30 days, it automatically becomes law. 

Where Do We Go From Here?

NYC employers facing the potential application of the strict ABC test to their workforce may wish to proactively identify the number of contractors who may be subject to employee status for purposes of sick leave under Int. No. 1926. Employers should carefully analyze the facts and circumstances of the work performed by these contractors with the ABC test in mind.  The bill purports to have retroactive effect, so employers will also need to determine whether and to what extent impacted workers have begun to accrue sick leave under ESSTA. Employers may also want to consult counsel to discuss and assess the logistics of implementing sick leave and providing notice to workers not previously eligible.

See Footnotes

​1 New Jersey has already codified the ABC test for purposes of unemployment insurance.  N.J. Stat. Ann. § 43:21-19. The New Jersey Supreme Court has adopted the ABC test for purposes of Wage and Hour and Workers Compensation Insurance purposes.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.