IT specialists and high-end professionals ask if they will be affected by new proposed classifications of “employee” and “independent contractor” under Senate bill S-4204/A-5936. Although this Senate bill attempts to clarify the definition of independent contractor as distinct from an employee, in reality it may leave many employees, particularly those in certain fields such as IT specialists who regularly work for a number of companies, remaining in a grey area as to how they will be treated under NJ Wage and Hour Law and the NJ Wage Payment Act.
The ABC Test
The current test as of this date of publication to determine if one is an employee for purposes of the NJ Wage and Hour Law and the NJ Wage Payment Act, is commonly referred to as the “ABC Test”.
The regulation adopted to implement the NJ Wage and Hour Law provides that the criteria identified in N.J.S.A. § 43:21-19(i)(6)(A)-(C) of the Unemployment Compensation Act and case law will be used to determine whether an individual is an employee or independent contractor. N.J.A.C. 12:56-16.1. The regulations implementing the New Jersey Wage and Hour Law, N.J.S.A. §§ 34:11-56a to 34:11-56a38, expressly provide that the distinction between an employee and an independent contractor shall be resolved by reference to the ABC test set forth in the Unemployment Compensation Act. N.J.A.C. 12:56-16.1.
The ABC test presumes a worker is an employee unless the employer can make certain showings regarding the individual employed, including: (A) Such 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; and (B) Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and (C) Such individual is customarily engaged in an independently established trade, occupation, profession or business. N.J.S.A. § 43:21-19(i)(6). The failure to satisfy any one of the three criteria results in an employment classification.
The ABC test was discussed in Hargrove v. Sleepy's, LLC, 220 N.J. 289 (2007). Hargrove v. Sleepy's was a case involving a certified question from a Federal Court. The Court determined that under New Jersey law, the ABC test derived from the New Jersey Unemployment Compensation Act, N.J.S.A. § 43:21-19(i)(6), governs whether a plaintiff is an employee or an independent contractor for purposes of resolving a wage-payment or wage-and-hour claim to determine a plaintiff's employment status for purposes of the New Jersey Wage Payment Law, N.J.S.A. §§ 34:11-4.1 to 34:-4.14, and the New Jersey Wage and Hour Law, N.J.S.A. §§ 34:11-56a to 34:11-56a38.
Hargrove which relied on the reasoning in an earlier case, D'Annunzio, where the Court discussed the test for establishing an employee relationship in the context of the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -8. CEPA defines "employee" as "any individual who performs services for and under the control and direction of an employer for wages or other remuneration." N.J.S.A. 34:19-2(b). The D'Annunzio Court acknowledged the definition of employee includes more than a restricted number of traditional employees and does not exclude, explicitly, persons who are designated as independent contractors performing services for an employer for remuneration.
The Hargrove Court held that the "ABC" test derived from the New Jersey Unemployment Compensation Act, N.J.S.A. 43:21-19(i)(6), governs whether a plaintiff is an employee or an independent contractor for purposes of resolving a wage-payment or wage-and-hour claim.
The Proposed Legislation Alters the Second Part of the ABC Test
The proposed legislation alters the second part of the ABC Test, part B, by removing the words “either” and the “or” in that section: the individual’s service is [either] outside the usual course of the business for which the service is performed[, or the service is performed outside of all the places of business of the employer for which the service is performed].
Under the new legislation, persons shall be deemed employees, not independent contractors, unless:
a. The individual has been and will continue to be free from control or direction over the performance of the service, both under the individual’s contract of service and in fact; and
b. The individual’s service is outside the usual course of the business for which that service is performed; and
c. The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the work performed."
This new proposed legislation, S-4204/A-5936, intends to give certain workers such as UBER and LIFT Drivers and delivery service persons, who may only work for or through one company, the same wage protections as employees. However, if the exclusive strategy to prove one is an independent contractor is to demonstrate that the worker or professional performing work for a certain business entity, performs work tasks that are distinct from those of that regular business entity, it may nevertheless leave a grey zone for individuals who provide services for remuneration to numerous business entities, such as IT specialists and marketing experts. How this proposed legislation if enacted will affect these types of professions remains to be seen.
Note: This proposed legislation, S-4204/A-5936, is not written specifically to address whistleblowing to those classified as independent contractors, to distinguish between those who are protected or not protected from retaliation for whistleblowing under New Jersey's Conscientious Employee Protection Act (CEPA). Individuals, even high-end professionals, designated as independent contractors are not automatically excluded from the protection afforded whistleblowers under CEPA. CEPA, N.J.S.A. §§ 34:19-1 to -8, defines an "employee" as any individual who performs services for and under the control and direction of an employer for wages or other remuneration. The statutory definition does not exclude, explicitly, persons who are designated as independent contractors performing services for an employer for remuneration. Protection for Whistleblowing for individuals who are labeled as "independent contractors" is established by evolving NJ case law.
Do Not Sit on Your Rights, or You May Lose the Right to File Your Claim.
If you have not been paid properly or are a whistleblower or other worker and your employer tells you that you are an independent contractor and not covered under the NJ employee statutes, such as the Whistleblower Law, the Law Against Discrimination, Unemployment Compensation law, Workers’ compensation law, Wage and Hour Law and Wage payment law, etc., you should contact this office. If you think you have been retaliated against for asserting your legal rights, it is essential for you to contact an experienced, aggressive and successful employment discrimination and whistleblower attorney who will be aggressive about enforcing your rights as soon as possible.
If your employer did not pay you overtime, or you have been demoted, had your hours cut, terminated, harassed or been subjected to retaliation for complaining about, objecting to, refusing to participate in, or reporting what you believe is your employer’s illegal or improper conduct or wage payment, you should contact this law firm as soon as possible. I am an experienced, aggressive and compassionate employment attorney who will be aggressive about enforcing your rights. I am successful in bringing employment retaliation, discrimination and whistleblower lawsuits and recovering money for workers.
If you are being subjected to such unlawful workplace acts or retaliation, contact Hope A. Lang, Attorney at Law today for a free consultation. I accept whistleblower and discrimination cases from all over New Jersey.
New Jersey employment attorney, Hope A. Lang, Attorney at Law serves clients throughout the state, including Bergen, Middlesex, Essex, Hudson, Monmouth, Ocean, Union, Camden, Passaic, and Morris Counties with locations in Southern, Central, Western and Northern NJ to meet with clients.