The New Jersey Supreme Court Speaks: Don’t Label Employees Independent Contractors Unless You Can Meet Every Element Of The ABC Test – JD Supra

Dry Wall Contractor

Although the New Jersey Supreme Court’s Decision in East Bay Drywall, LLC, v. Department of Labor and Workforce Development, 2022 N.J. LEXIS 671, 2022 WL 3031731 (Decided August 2, 2022) does not address employment status in a workers’ compensation setting, the approach from the Court is one to consider. It is not unlikely that the test in this unemployment compensation case could be relied upon in a workers’ compensation setting. Over the past 10 years or so, the New Jersey Appellate decisions on independent contractor versus employee have varied in terms of the approach and the test applied. We would not be surprised if the New Jersey Supreme Court’s decision in this matter is used to implement some form of uniformity in the determination of employee versus independent contractor.

East Bay is a drywall installation business that hires individuals on a per-job basis. Once a builder accepts East Bay’s bid for a particular project, East Bay then contacts workers to see who is available. The workers are free to accept or decline the work. According to the principal of East Bay, these workers have been known to leave a job mid-installation if they found a better job. One key factor during the testimony of East Bay’s principal was that although he stated that these workers also have their own business projects and sources of income, he was unable to produce any evidence to support that claim. East Bay provides the raw materials. The workers bring their own tools and arrange for their own transportation to the worksite. East Bay does not dictate who or how many laborers must be utilized in order to complete the projects. East Bay does not direct how the work should be performed but is only responsible for the finished product.

The issue arose in 2013 when East Bay, a business registered as an employer up to that point, ceased reporting wages to the Department of Labor and Workforce Development. As a result, an auditor for the Department conducted a status audit to determine whether the workers hired by East Bay between 2013 and 2016 were independent contractors or employees such that there must be ongoing contributions towards unemployment compensation and temporary disability benefits. There were 16 total individuals. The auditor found that 4 of the 16 should have been classified as employees. The subsequent decisions were all over the board. The Office of Administrative Law concluded that 3 of the 16 were independent contractors. The Commissioner of the Department determined that all 16 workers were employees. The Appellate Division found 5 of the workers to be employees but reversed as to the other 11. The Supreme Court took the appeal to sort all of these various decisions out and reach a final conclusion.

The thrust of the Supreme Court’s Decision was whether or not the six individuals were properly classified as employees or independent contractors under the unemployment compensation law (UCL). The test, commonly referred to as the “ABC test” is used to determine whether the individual serves …….


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