By Eric B. Meyer
The New Jersey Supreme Court just fashioned a test to determine whether a worker is an employee or an independent contractor for purposes of resolving a wage-payment or wage-and-hour claim.
On Wednesday the Court, in this opinion, concluded that the “ABC” test, a creature of the New Jersey Unemployment Compensation Act, will determine whether plaintiff is an employee or an independent contractor for purposes of resolving a wage-payment or wage-and-hour claim.
The applicable Unemployment Compensation Act provision speaks in terms of control. The law presumes that an individual is an employee. It’s then up to the company to prove otherwise; i.e., that the individual is an independent contractor.
3 keys to New Jersey’s “ABC” test
To do this, the company must do the following:
- Show that it neither exercised control over the worker, nor had the ability to exercise control in terms of the completion of the work.
- Show that the services provided were “either outside the usual course of the business … or that such service is performed outside of all the places of business of the enterprise.”
- Show that the purported independent contractor actually “has a profession that will plainly persist despite the termination of the challenged relationship.”
If any one of these factors cuts in favor of an employer/employee relationship, then the individual is an employee according to the New Jersey Supreme Court test.
What this means to employers
And why does this matter? You can pay independent contractors whatever you want.
Conversely, employees must be paid minimum wage, and time and a half for overtime. So, if you mess up the classification of one of your workers, in addition to the unpaid wages that you may owe, there are potential fines and, attorney’s fees and costs.
This was originally published on Eric B. Meyer’s blog, The Employer Handbook.