Protections enjoyed by New Jersey employees under federal, state, and, in many areas, local employment statutes include minimum wage, overtime pay, and prohibitions on discrimination and workplace harassment. Legal protections for independent contractors, on the other hand, are mostly limited to the provisions of the contract between that individual and the employer. Wrongfully classifying an employee as an independent contractor violates federal law and can lead to damages for the misclassified worker. The exact definition of an “employee” varies from one state to another. This can complicate claims that cover multiple states. The New Jersey class representatives in an ongoing misclassification lawsuit have formally objected to a proposed settlement, arguing that it fails to account for specific New Jersey statutes and caselaw. In re FedEx Ground Package System, Inc. Emp’t Practices Litig., No. 3:05-cv-00595, objection (N.D. Ind., Nov. 14, 2016), see also No. 3:05-md-00527 (MDL).
The federal Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., sets minimum wage and overtime standards, and it also allows civil claims for misclassification. It defines an “employee,” with some exceptions, as “any individual employed by an employer.” Id. at § 203(e)(1). Since this definition is not especially helpful in adjudicating misclassification claims, courts look at state law to determine whether a claimant is an employee or an independent contractor.
New Jersey defines “employee” very broadly in the context of misclassification laws, thanks to a recent New Jersey Supreme Court ruling, Hargrove v. Sleepy’s, LLC, 106 A.3d 449 (N.J. 2015). The court adopted the “ABC test,” which is based on provisions found in the New Jersey Unemployment Compensation Act. An individual is an “employee” under the ABC test unless they meet three criteria: (1) they are “free from control or direction over the performance of” their jobs by the employer; (2) their job is either “outside the [employer’s] usual course of…business” or “performed outside of all the [employer’s] places of business”; and (3) the individual’s job is part of their “independently established trade, occupation, profession or business.” N.J.S.A. §§ 43:21-19(i)(6)(A) – (C).
The FedEx lawsuit involves over 70 consolidated cases from around the country. The plaintiffs, who work as delivery drivers, allege that their employer misclassified them as independent contractors in order to shift various costs onto them. This allegedly included requiring drivers to purchase their delivery trucks and pay for delivery routes. The employer, however, allegedly continued to exercise a significant degree of control over how the drivers did their jobs. Appellate courts have ruled that the drivers are employees under the laws of California, Alexander v. FedEx Ground Package System, Inc., 765 F.3d 981 (9th Cir. 2014); and Kansas, Craig v. FedEx Ground Package System, Inc., 792 F.3d 818 (7th Cir. 2015).
The class of New Jersey plaintiffs reportedly includes about 900 individuals. The class representatives have objected to the proposed $25 million settlement on two main grounds. First, they claim that the settlement amount omits as much as $50 million that could be recoverable under the New Jersey Consumer Fraud Act, N.J. Rev. Stat. § 56:8-1 et seq. They further argue that the settlement amount is not based on the ABC test in Hargrove, which they say gives them a greater chance of prevailing on the merits of their claims.
If you need to speak to an employment attorney regarding a matter in New Jersey or New York, contact the Resnick Law Group today online, at 973-781-1204, or at 646-867-7997.
More Blog Posts:
Proposed Law Would Protect Rights of Workers in the “Gig Economy”, The New Jersey Employment Law Firm Blog, October 13, 2016
Uber Faces Misclassification Claims in New Jersey and Around the Country, The New Jersey Employment Law Firm Blog, July 14, 2016
Proposed New York City Legislation Would Protect Independent Contractors from Wage Theft, The New Jersey Employment Law Firm Blog, January 21, 2016