NEW JERSEY SUPREME COURT SETS TEST TO DETERMINE INDEPENDENT CONTRACTOR STATUS

On January 14, 2015, in a unanimous decision, the New Jersey Supreme determined that the ABC test is the proper test an employer must use to determine if its workers are independent contractors or employees. Of all the various tests used by New Jersey and other states, the ABC test sets the bar the highest for an employer to successfully uphold it independent contractor status designation for its employees.

The New Jersey Supreme Court began its analysis by recognizing that the New Jersey wage and hour laws are remedial statutes and are meant to be interpreted broadly to benefit workers. Thus, the Court held that the ABC test presumes that an individual is an employee unless the company can show that the individual meets the following three elements:

(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.

If the company does not meet one element of the three part test, the individual will be deemed to be an employee and therefore entitled to all of the rights and benefits afforded to employees. It is important to recognize that this is not a new test but rather the same test that New Jersey already uses in connection with its unemployment compensation cases. In addition, the ABC test is the controlling test used by many other states in connection with their independent contractor/employee analyses in the wage and hour context.
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As a result, employers with offices in New Jersey will want to review how their workers are classified to make sure they are in compliance with this new ruling by the New Jersey Supreme Court. If you have any questions please feel free to call any of the attorneys at Danziger Shapiro. We will be happy to discuss this and any other issue that may be affecting your business.

This entry is presented for informational purposes only and is not intended to constitute legal advice.