The New Jersey Appellate Division remanded a final agency decision which concluded that janitorial franchisees of Coverall North America, Inc. were employees under the New Jersey Unemployment Compensation Law. Coverall N. Am., Inc. v. N.J. Dep’t of Labor & Workforce Dev., 2026 WL 1425167 (N.J. App. Div. May 21, 2026).
Coverall, a nationwide janitorial franchisor, challenged a Department of Labor determination assessing over $1 million in unpaid unemployment contributions after finding that Coverall failed the ABC test for its franchisees to qualify as independent contractors. An administrative law judge initially ruled in Coverall’s favor but the Commissioner reversed, concluding that Coverall had failed to prove all three prongs of the ABC test: (1) that the cleaners operated independently established businesses, (2) that they were free from Coverall’s direction and control, and (3) that the services were outside Coverall’s usual course of business.
On appeal, the Appellate Division remanded for further fact-finding, holding that the record was insufficient in two ways: (1) the extent to which Coverall controlled pricing charged to customers, and (2) whether certain individual franchisees operated independent businesses outside their Coverall franchises. The court emphasized that pricing control may be a key indicator of “control” and “remuneration” under the ABC test, and that the agency failed to determine whether franchisees could meaningfully negotiate prices with customers. The court also directed the agency to reassess whether several franchisees were misclassified under prong C of the ABC test based on evidence suggesting they earned substantial income from non‑Coverall customers.