Audit Your 1099 Drivers: ABC Control Checklist
If your drivers wear your brand, lease exclusively, and follow your routes, the ABC test may treat them as employees with wage exposure.
The settlement shows the bill can survive bankruptcy
If your drivers are on 1099, the label does not decide whether they are employees. The settlement with STG Logistics, Inc., STG Drayage, LLC, and other subsidiaries was reached on July 29, 2026, and resolved the first lawsuit under New Jersey's 2021 law allowing the state to sue employers in Superior Court over worker misclassification. The STG case involved drivers who verified Google Maps data for staffing company Aceolutions, which supported Cognizant's contract with Google. The settlement guarantees at least $2,775,000 for truck drivers and the State, and the amount is treated as a priority claim under bankruptcy law despite STG's earlier bankruptcy filing in 2026.
The settlement allocates $2,220,000 to truck drivers primarily for wage-and-hour violations and $555,000 to New Jersey for wage-and-hour penalties plus contributions to unemployment compensation and state disability benefits funds. It also imposes an additional $7,500,000 penalty payable to the State if STG violates the agreement. For a founder, the exposure is wage-and-hour liability, penalties, and a settlement obligation that can survive bankruptcy.
The ABC test turns on control, not labels
The ABC test is used in New Jersey to decide employee versus independent-contractor status under the state Wage and Hour Law, Wage Payment Law, and Unemployment Compensation Law. It presumes that a worker is an employee unless the business can prove independent-contractor status. Prong A asks about the degree of control a business exercises over a worker.
A New Jersey appellate court held that a putative employer's control over customer pricing was relevant to whether workers operated an independently established business under Prong C. New Jersey's final ABC-test rule indicates that a written contract, licensing, or business registration alone does not establish independent-contractor status, and that working for multiple employers does not automatically make a worker independent.
In the STG matter, the state alleged that STG required drivers to display the company's name on their trucks, lease the trucks exclusively to the company, and obtain written consent before using the trucks for other work. It also alleged that STG made drivers accept fixed independent-contractor agreements, put GPS trackers in their trucks, and set routes, delivery monitoring, and pay rates. Under the ABC test, STG failed to meet any of the requirements needed to treat the drivers as independent contractors.
The audit asks whether the driver controls the work
Run the checklist against the contract, the equipment lease, the dispatch or tracking screen, and the rate sheet. Each item has an independent version, where the driver controls the choice, and an employee red flag, where the company controls it.
- Branding on equipment. Independent: the driver chooses whether to display your logo, where it appears, and how prominent it is. Red flag: you require the logo.
- Exclusive truck leasing. Independent: the driver can lease from any lessor and use the truck for other work. Red flag: the truck is leased exclusively to you or your lessor.
- Consent for other work. Independent: the driver may take other jobs without asking permission. Red flag: written consent is required before other work.
- Contract terms. Independent: the driver can negotiate key terms or walk away. Red flag: a non-negotiable independent contractor agreement.
- GPS tracking. Independent: the driver decides whether to install a tracker and what data is shared. Red flag: a required GPS device used for monitoring.
- Assigned routes and tight delivery monitoring. Independent: the driver sets the route, timing, and method. Red flag: assigned routes with tight monitoring.
- Company-set rates. Independent: the driver negotiates the rate. Red flag: you set the pay rate.
If several answers point to company control, the 1099 label will not carry the classification. Keep the audit in writing: note the contract language, the equipment lease, the dispatch settings, and the rate sheet. The fix is to separate what the law requires from what is merely good practice. You can let the driver choose the truck, the route, and the rate. If you need those controls, classify the driver as an employee and set up payroll, wage records, and benefits where required.