Federal Court Rules Streaming Performers Independent Contractors Under FLSA, but Not New Jersey Law

Quick Hits

• A federal district court in New Jersey ruled that adult performers on an online streaming platform are independent contractors under the FLSA but qualify as employees under New Jersey’s stricter ABC test.
• The court found that the performers could not be classified as independent contractors under the ABC test because they operated within the operator’s usual course of business and not outside its places of business by providing services on the operator’s online digital platform.
• The court explained that under New Jersey’s ABC test, an enterprise’s place of business includes any location where core commercial services are being executed, including online digital platforms.
• This decision highlights how it may be more difficult for employers to classify workers as independent contractors under New Jersey’s ABC test than under FLSA and has implications for gig economy companies.

In the case, Tomasello v. ICF Technology Inc., a group of adult entertainers who livestream on the “Streamate” digital platform asserted collective and individual claims under the FLSA, the New Jersey Wage and Hour Law, and the New Jersey Wage Payment Law. They alleged the platform operator misclassified them as independent contractors, retained 65 percent of their online tips, and paid them less than minimum wage. The platform operator argued that the performers are independent contractors and thus not employees under the FLSA or New Jersey wage-and-hour laws.

The federal district court held that while the performers were independent contractors under the FLSA’s “economic reality test,” they did not meet New Jersey’s “ABC test.” Specifically, the court found that the operator could not show that the performers’ livestreamed performances on the operator’s digital platform were “outside of all places of [its] business” nor outside its “usual course of business.”

“Although Plaintiffs possess the operational hallmarks of independent contractors under federal law, this Court finds that they remain statutory employees under New Jersey’s unyielding ABC framework,” Judge Madeline Cox Arleo wrote in the court’s decision.

Notably, the decision comes just weeks after the New Jersey Department of Labor and Workforce Development (NJDOL) adopted final regulations on New Jersey’s ABC test, set to go into effect on October 1, 2026. The court noted these new regulations do not govern the claims in this case, but do not “disrupt” its analysis since the “statutory ABC test remains the mandatory framework.”

FLSA Economic Reality Test

The court examined the FLSA claims under the Third Circuit’s six-factor economic reality test, under which courts balance out the factors looking at the overall economic reality of the worker-putative employer relationship. The court explained that under the test, no single factor is dispositive, and courts should look at the totality of the circumstances.

According to the decision, the performers provided livestream content on the Streamate platform, offering some free and some paid content. The platform took a share of the revenue generated by the paid-for content. The performers were bound by “Performer Agreements” and certain rules and guidelines for streaming.

While the platform required employers to comply with some rules on content and production, performers were allowed to use their screen name across various platforms and were not restricted from performing on competitor websites. Performers could also set their own schedules and prices. Per the decision, performers also purchased their own equipment.

Under these facts, the court found that the “[p]erformers operate as independent economic entities in business for themselves.” In particular, the court noted that they set their own shooting locations and managed their own businesses, including their own digital marketing.

“This lack of economic dependence is fundamentally confirmed by the fact that Performers retain the absolute right to livestream concurrently on the Streamate website and alternative[ly], [the right to] stream on competing digital platform[s],” the court said.

New Jersey’s Three-Pronged ABC Test

While the court found the performers independent to be contractors under the FLSA, the court came to a different conclusion when analyzing the facts under New Jersey’s ABC test. The three-pronged test looks at whether: (A) the worker is free from control or direction; (B) a worker’s services are outside of the putative employer’s business or “outside of all the places of business of the enterprise,” and (C) the worker is engaged in an independently established trade, occupation, profession, or business.

The court recognized that the ABC test is a “conjunctive standard,” meaning that a putative employer must prove all three prongs, A, B, and C, to “secure independent contractor classification.” While the court found that the adult performers had sufficient control over their workers to satisfy Prong A, the court found the operator failed to satisfy Prong B, and thus the performers were not independent contractors. Since the operator failed Prong B in the conjunctive test, the court declined to analyze Prong C.

The court explained that “Prong B requires Defendants to show either that the service performed by the worker is entirely outside the usual course of the hiring entity’s business, or that such service is performed outside of all the places of business of the enterprise.” (Emphasis added).

The operator had argued that since the performers work in an entirely digital, gig-economy platform with performances actually being performed at the performers’ own locations, the performers were outside of the usual course of business and not in any of the operator’s physical places of business.

But the court explained that in a “digital platform economy, an online entity’s ‘usual course of business’ is defined not by the code running its servers, but by the specific consumer-facing services it holds out to the open marketplace.” In this case, the “operational reality of the Streamate platform demonstrates that Defendants’ entire business model is dependent on the continuous generation of web-based adult content Performers create.” While the platform operator argued it is a “technology company,” the facts indicate that it curates a market, monetizes, and profits from the performers’ livestreaming services and that the performers are “integral” to the business, the court said.

Further, the court explained that an entity’s “place of business” under Prong B “is not bounded by brick-and-mortar walls; it extends to any proprietary digital infrastructure that serves as the

primary commercial venue for the company’s operations.” In this case, the platform is not simply “a passive internet utility” but a “highly integrated, proprietary workplace where customers are aggregated, financial transactions are executed, and live content is distributed and policed,” the court said.  

“Because the digital platform functions as the indispensable commercial venue where the business operates, the services are not performed ‘outside of all places of business’ of the enterprise,” the court said. “[B]y logging into Streamate, Plaintiffs are effectively performing their services within the virtual footprint of the enterprise.”

Key Takeaways

The decision highlights differences in the analyses to assess independent contractor status between the Third Circuit’s “economic reality test” under the FLSA and New Jersey’s “more stringent” three-pronged “ABC test.” The decision demonstrates that courts can reach divergent conclusions when analyzing the same set of facts under the FLSA and under New Jersey’s wage and hour laws.  It also demonstrates how New Jersey’s ABC test, which requires employers to satisfy all three factors, makes it difficult for employers to classify workers as independent contractors.

Employers with workers in New Jersey classified as independent contractors may want to review the extent to which those workers may be considered employees under New Jersey law. In particular, the decision suggests that workers who only use a company’s online platform to generate content, and who are typically considered independent contractors under federal law, may be considered employees under the ABC test. This could have serious implications for technology platform companies or others that participate in the so-called gig economy.

Ogletree Deakins’ Morristown office will continue to monitor developments and will provide updates on the Class Action, Employment Law, New Jersey, Sports and Entertainment, Technology, and Wage and Hour blogs as additional information becomes available.

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