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A recent New Jersey federal court decision involving online streamers may have implications for businesses that engage influencers, creators, athletes, ambassadors, user-generated content (UGC) creators and other digital talent as independent contractors.
In Tomasello v. ICF Technology, the court examined the status of performers on Streamate, an online livestreaming platform. Although the parties' agreements expressly characterized the performers as independent contractors, the court emphasized that contractual labels alone do not determine worker status. As the court explained, "formal labels and captions carry zero legal weight; an employer cannot create an independent contractor relationship through nomenclature alone."
The case is noteworthy because the court held the streamers were independent contractors under federal law but that they were not under state law, leading to liability.
Applying the federal Fair Labor Standards Act's "economic realities" test, the court concluded that the performers were independent contractors. The court found that the performers exercised substantial autonomy over their businesses, including deciding when to work, selecting their own content, controlling their filming locations, setting pricing, working for competing platforms and maintaining significant independence over their work environment.
The court reached a different conclusion under New Jersey law.
New Jersey applies the ABC test, which presumes workers are employees unless the hiring entity satisfies each required element of the test. Importantly, the defendants successfully established the first prong of the test. The court found that the performers were free from the company's control both contractually and in practice. According to the court, the performers independently dictated their broadcasting schedules, selected their own creative content, maintained control over their filming locations and exercised substantial autonomy over pricing and workspace design.
That, however, was not enough.
The court held that the defendants failed the second prong of the ABC test, which requires a company to demonstrate either that the worker performs services outside the company's usual course of business or outside all of the company's places of business.
According to the court, the performers were providing the very service the platform existed to offer. The court rejected the argument that Streamate was merely a technology company providing software and instead focused on the reality that the platform curated, marketed, distributed and monetized livestreaming content created by the performers. In the court's view, the performers were integral to the business itself.
The court also adopted a broad view of what constitutes a company's "place of business." Although the performers worked remotely from their own homes and other locations, the court concluded that the Streamate platform functioned as a commercial venue where customers were aggregated, transactions occurred, content was distributed and business operations were conducted. As a result, the court determined that the performers were effectively providing services within the company's virtual business footprint.
Because the defendants failed the second prong of the ABC test, the court concluded that the performers were employees under New Jersey law and expressly declined to analyze the third prong.
While Tomasello involved adult-content streamers rather than traditional influencers, the court's reasoning may be relevant to a variety of creator-driven business models. Many businesses today rely on creators, influencers, athletes, ambassadors and other talent to create content, engage audiences and promote products and services. Increasingly, those relationships are facilitated through creator marketplaces, influencer networks, name, image and likeness (NIL) programs, ambassador programs, UGC platforms and other digital ecosystems.
The most notable aspect of the decision is that the defendants prevailed on the control issue and nevertheless lost the classification dispute under New Jersey law. The court found that the performers controlled their schedules, selected their own content, determined where to work, set pricing and were free to perform on competing platforms. Yet those facts were insufficient because the court concluded that the performers were providing services within the company's usual course of business and through what the court viewed as the company's virtual place of business.
The consequences of misclassification can be substantial. Depending on the jurisdiction, a finding that individuals have been improperly classified as independent contractors may result in exposure for unpaid wages and overtime, payroll taxes, employee benefits, expense reimbursement, unemployment and workers' compensation contributions, statutory penalties, attorneys' fees and, in some circumstances, class action or representative action liability. Those risks can be magnified when a company engages large numbers of creators, influencers, ambassadors, athletes or other talent through a common program or platform.
Although the decision arose under New Jersey law, somewhat similar ABC-style worker-classification tests exist in a number of jurisdictions, including California. Businesses that engage creators and other digital talent should be mindful that classification disputes may focus not only on control, but also on whether those individuals are performing services that a court views as central to the company's business.
