New Jersey employment statutes protect workers against a variety of acts by employers, but in order for these protections to apply, an employment relationship must exist. Independent contractors generally do not fall within the scope of these laws. Employers therefore sometimes attempt to classify workers as independent contractors when they should be employees. This is known as “misclassification.” In May 2018, the Governor of New Jersey established a task force to make recommendations on how the state can address employee misclassification. The task force released a report in July 2019 that provides 10 recommendations for identifying misclassification, enforcing state law, and deterring employers from misclassifying their employees.
The task force defines misclassification as “the practice of illegally and improperly classifying workers as independent contractors, rather than employees.” It states in its report that the practice has increased over the past decade by about 40 percent. It attributes this, in large part, to the “fissured workplace,” in which companies use an extensive network of outsourced contractors and subcontractors.
In a 2015 ruling, the New Jersey Supreme Court adopted the “ABC test” for determining whether an individual is an employee or an independent contractor, based on a definition of “employment” codified at N.J. Rev. Stat. §§ 43:21-19(i)(6)(A) – (C). The test presumes that a person is an employee unless their working conditions meet three criteria. The individual’s work must be generally free from control by the employer, the services performed by the individual must be either not part of the employer’s usual business or performed somewhere other than the employer’s usual place of business, and the individual must have their own “independently established trade, occupation, profession or business.”