State and federal laws protect New Jersey employees’ rights to minimum wage and overtime compensation. The term “employees” is important here, because these laws’ protections are not available to independent contractors. The distinction between an employee and an independent contractor has been the subject of much employment litigation, both in New Jersey and around the country. Employers may attempt to classify employees as independent contractors in order to avoid various legal obligations, a practice known as “employee misclassification.” New Jersey has developed a reasonable clear definition of “employee.” Federal law lags behind, with different definitions for different statutes. Recent litigation addressed the definition of “employee” under the Fair Labor Standards Act (FLSA), which sets a national minimum wage and standards for overtime pay. The current White House administration withdrew an employer-friendly definition of “employee” put in place by the previous administration. In March 2022, a federal judge vacated this move, reinstating the earlier rule.
The FLSA defines “employee” in quite general terms as “any individual employed by an employer.” It defines “employ” as “to suffer or permit to work.” The FLSA’s definition of “employee” goes into more detail for individuals employed by the government. It excludes most elected officials, political appointees, and volunteers for government agencies. The statute also exempts employees in various roles from its provisions on minimum wage and overtime pay. For workers who are neither excluded from the definition of “employee” nor exempt from the FLSA’s protections, questions often still remain as to whether they are “employees” in the specific context of the FLSA.
New Jersey uses the “ABC test” to determine whether an individual is an employee or an independent contractor. The test is named for the three-part definition of “employee” found in §§ 43:21-19(i)(6)(A) through (C) of the New Jersey Revised Statutes. New Jersey employment law presumes that a worker is an “employee” unless the employer can establish all three of the following:
A. The worker has control over how and when they do their job;
B. The worker performs the services away from the employer’s usual premises, or their services are not part of the employer’s regular business; and
C. The worker has an “independently established” business.