Independent Contractors In NJ May Really Be Employees

The New Jersey Supreme Court issued its decision in Hargove v. Sleepy’s, 220 N.J. 289 (2015), which will have wide-reaching implications for employers and employees in New Jersey. The Court determined “which test a court should apply under New Jersey law to determine an employee’s status for purposes of the Wage Payment Law (WPL), N.J.S.A. 34:11-4.1 to 4.14, and the Wage and Hour Law (WHL), N.J.S.A. 34:11-56a to 56a38.” The Supreme Court’s decision was that the “ABC” test should be applied in determining whether an individual is an employee or an independent contractor under both statutes.

The “ABC” test adopted by the Court begins with the presumption that an individual is an employee, and puts the burden on the employer to demonstrate that this is untrue. The “ABC” test contains three inquiries:

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

The analysis under part A, or the control inquiry, includes not only what is written in the agreement, but also the facts of the actual employment situation. Moreover, control need not be total; case law interpreting the “ABC” test indicates that “some control” may be sufficient. The inquiry under part B requires a court to determine whether the services that an individual is providing are part of the employer’s usual course of business, which is often a straightforward determination. Finally, the inquiry under part C requires that the individual to be part of an ongoing business that “can continue to exist independently of and apart from the particular service relationship.” In other words, the individual’s profession must be one that will “plainly persist despite the termination of the challenged relationship.”

The ramifications and implications of the Court’s ruling in Sleepy’s are significant. The “ABC” test starts out with the presumption that an individual is an employee, and the burden is then on the employer to demonstrate the opposite, which can be a heavy burden. For example, where individuals are performing the same work as others who are acknowledged employees, yet are simply categorized differently, employers will face a tough battle to avoid liability for those individuals as employees under the WPL and WHL.

This decision can impact numerous categories of employees, including, but not limited to, truck drivers, computer professionals, and independent sales people.

The Sattiraju & Tharney, LLP litigates independent contractor issues under the New Jersey Wage and Hour Law and the New Jersey Wage Payment Law, and is available for consultations from all workers.

For more information on Wage and Hour Dispute Cases in New Jersey & New York go to our New Jersey Wage and Hour Dispute Lawyers page.