New Jersey Supreme Court Applies Broad Definition of "Employee," Including Many Normally Classified as Independent Contractors
A key question in many wage and hour claims is whether the complainant is an "employee," and therefore protected by said laws, or an "independent contractor," who is not covered. The New Jersey Supreme Court, in response to a certified question from the Third Circuit Court of Appeals, applied a very broad definition of "employee" for the purposes of state wage and hour laws. Hargrove, et al v. Sleepy's, LLC ("Hargrove III"), Nos. A-70 Sept. Term 2012, 072742, slip op. (N.J., Jan. 14, 2015). It applied the definition used in state unemployment law, which is much more favorable to employees than state wage and hour laws have been.
The plaintiffs work as delivery drivers for the defendant, a mattress company. They contend that they are employees, while the defendant argues that they are independent contractors. They signed an "Independent Driver Agreement" (IDA) when they began working for the defendant, which they claim was "a ruse to avoid payment of employee benefits." Id. at 3. They filed suit in federal court in 2010, alleging that the defendant was wrongfully denying them employment benefits under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and the Family and Medical Leave Act (FMLA), 29 U.S.C. § 2601 et seq.
The U.S. district court granted summary judgment for the defendant, finding that the plaintiffs did not meet the definition of an "employee" under ERISA. Hargrove, et al v. Sleepy's, LLC ("Hargrove I"), No. 3:10-cv-01138, mem. and order (D.N.J., Mar. 29, 2012), citing Nationwide Mutual v. Darden, 503 U.S. 318 (1992). While the court acknowledged that the defendant had "extensive control of deliverer's activities," Hargrove I at 10, it noted other factors that led to its conclusion, including the IDAs and the facts that each plaintiff had set up their own business entities, kept their own business records, had relationships with the IRS as business entities, and purchased and maintained their own delivery trucks.