New Jersey labor laws protect workers’ rights to a minimum wage, overtime pay, unemployment insurance, a workplace free of discrimination and harassment, and other matters. These laws regulate the relationship between employers and employees. Unfortunately, some employers try to evade their responsibilities by classifying employees as independent contractors. Employee misclassification is a violation of state law. New Jersey employment law places most of the burden of proof on employers to establish that an individual is not an employee. Legislation signed by the Governor in January 2020 assesses penalties for misclassification and requires employers to post notices of workers’ rights. In late 2019, the New Jersey Department of Labor and Workforce Development (LWD) demanded almost $650 million in unpaid employment taxes and interest from a rideshare company that has frequently been the subject of misclassification complaints.
Employees in New Jersey are covered by a rather vast array of federal, state, and local employment laws. They cover issues ranging from wages and hours to workplace safety. Some statutes only apply to employers with a minimum number of employees, while others apply to all employers. Independent contractors are not covered by these laws. Their legal protections are largely limited to the terms of their contracts and contract law. Many statutes do not provide a particularly helpful definition of an “employee.” The federal Fair Labor Standards Act, for example, defines an employee as “any individual employed by an employer.” 29 U.S.C. § 203(e)(1).
State law fills in gaps left by federal statutes. In 2015, the New Jersey Supreme Court adopted a definition of “employee” known as the “ABC test,” based on §§ 43:21-19(i)(6)(A) through (C) of the New Jersey Revised Statutes. An individual is presumed to be an employee unless the employer can establish three elements:
1. The employer does not exercise control over how the individual performs their job, both in the text of the contract and in actual practice;
2. The individual’s job is outside the scope of the employer’s regular business, or the individual performs their job away from the employer’s business premises; and
3. The individual works in their own separate business or trade.