New Jersey Stop-Work Order Against Teaneck Limo Company Shows Risks of Worker Misclassification

by Marisa Aratingi and Arman Borghei

On May 20, 2026, the New Jersey Department of Labor & Workforce Development (NJDOL) announced a stop-work order against a Teaneck limousine and taxi company, Kismet International Inc. t/a Kismet Int. Limo & Teaneck Taxi Service (“Kismet”).  Kismet was recently audited, revealing that the company misclassified 80 drivers from 2012-2015 and was found to owe a total balance of $207,358.81.

The decision was upheld through the full appeals process, and affirmed by the Superior Court of New Jersey. By treating these drivers as independent contractors, Kismet failed to make required contributions to the Unemployment Compensation Fund and the State Disability Benefit Fund. Consequently, drivers were deprived of the benefits typically afforded to employees.

What is Misclassification?

Under New Jersey law, workers are considered employees when they perform services for pay.  Employers sometimes classify their workers as independent contractors instead of as employees so as to avoid paying various benefits. It is the employer’s burden to prove that the individual in question qualifies as an independent contractor by satisfying all three prongs of the “ABC” test. The three components of New Jersey’s test are:

1. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
2. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
3. The individual is customarily engaged in an independently established trade, occupation, profession, or business.

If the employer is unable to prove any one of these prongs, the worker is deemed by New Jersey law as an employee. NJDOL has proposed new regulations to codify its interpretations of the ABC test, as well as those of the Supreme Court of New Jersey, which expand on and clarify these three prongs.

The functional effect of the ABC test is that independent contractor classification in New Jersey is strict and narrow.  Simply being issued a 1099 or being labeled as an independent contractor in a contract doesn’t override the statutory test. Taxi companies often struggle to meet the second prong because drivers perform their core business. Thus, the ABC test is a solid mechanism for protecting workers’ rights in New Jersey.

Why does Classifying Workers as Independent Contractors Matter under New Jersey law?

Companies that misclassify workers face significant risks under New Jersey law, where the ABC test presumes employee status. Improper misclassification may result in the employer owing significant amounts in back wages, benefits, unpaid payroll tax contributions (unemployment, disability, family leave), and penalties. The New Jersey Wage & Hour Compliance Poster Packet determines penalties of up to 5% of the worker’s gross earnings over the prior twelve months, up to $250 per misclassified employee for a first violation and up to $1,000 per misclassified employee for subsequent violations, and additional damages of up to 200% of wages owed and suspension or revocation of business licenses.

Additionally, misclassifying employees as independent contractors can lead to lawsuits, including class action litigation, seeking unpaid minimum wages, overtime, back wages, liquidated damages, attorney fees, and penalties. Other risks include back-payment of employer payroll taxes, workers’ compensation and unemployment insurance contributions..

Companies must treat classification decisions as both a matter of legal compliance and strategic business practices. In a state like New Jersey that earnestly audits misclassification, a company suspected of misclassification may face multi-year audits, large benefit fund assessments, and collateral liability in other jurisdictions.

What Rights or Protections Can Misclassified Workers Lose and What Legal Remedies Are Available?

In New Jersey, worker misclassification can affect unemployment insurance contributions, temporary disability benefits, wage protections, payroll taxes, and other employment-related obligations.  Companies label workers as contractors to avoid payment of many benefit due workers, such as payroll contributions, insurance, overtime obligations, and other legal requirements. Misclassification can harm workers even when they are performing the same work as employees because they may lose access to protections and benefits provided by employee status.

Workers in New Jersey should consider their experience and circumstances when determining their classification status. Under the NJDOL’s Independent Contractors and Misclassification guidance, being classified as a 1099 contractor does not guarantee independent contractor status. Instead, the facts of the work relationship are determinative.

Workers in New Jersey who are found to be misclassified can avail themselves of several available legal remedies.  Awards might include back pay, damages, and retirement or disability contributions, among others.

For decades, attorneys at Miller Shah have successfully represented misclassified workers in filing wage and hour claims. If you have questions or concerns regarding classification, please contact us to learn more.