Articles Posted in Employee Misclassification

New Jersey guarantees a minimum wage for all non-exempt employees in the state. In order for an individual to claim a right to minimum wage, they must establish that they are, legally speaking, an “employee.” Some employers try to avoid this obligation by misclassifying employees as independent contractors. This type of practice is considered a minimum wage violation. The federal and state definitions of “employee” differ slightly from one another, but both are based on the extent to which an employer controls how an individual does their job. A lawsuit pending in a Newark federal court alleges misclassification of online workers under both federal and New Jersey employment laws.

New Jersey has developed a concise definition of “employment” for the purposes of determining whether an employer has misclassified an employee as an independent contractor. A court must presume that an individual is an employee unless the employer can establish all three of the following elements:
A. The employer does not have direct control over how the worker does their job, both under the terms of a written contract and in actual practice.
B. The worker’s service is either not part of the employer’s usual business, or they do much of their work off-site.
C. The worker regularly works in their own trade or occupation separate from the employer.

At the federal level, the definition of “employment” in this context is also based on how much control an employer exerts, and how much independence a worker exercises. It is not as specific as New Jersey’s definition, so it tends to be less favorable to employees. The U.S. Department of Labor has stated that it is working on revising the definition.
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Employment laws in New Jersey and at the federal level guarantee a minimum wage and overtime pay for many employees, as well as many other protections. In order to take advantage of these legal safeguards, a worker must demonstrate that an employment relationship exists between them and their employer. The definition of an “employee” in federal and New Jersey employment statutes is rather vague. The U.S. Department of Labor (DOL) recently issued proposed rules that would establish a new test to determine whether a worker is an employee or an independent contractor. The current rule, which the DOL put in place under the previous presidential administration, is generally favorable to employers. New Jersey’s rule for state law claims presumes that a worker is an employee unless an employer can prove otherwise.

The employer-employee relationship is a complicated concept, legally speaking. It draws on legal theories about an employer’s authority to exert control over a person. For example, how much say does an employer have over when, where, and how a worker does their job? Do they have a specific workstation, monitored by supervisors, where the worker must be during specific working hours? If so, the worker is probably an employee. An independent contractor typically has more autonomy over their work. A large body of federal and state laws protect employees’ rights. An independent contractor’s rights depend on the terms of their contract with the employer.

The DOL’s current rule tends to favor employers. Unlike the New Jersey rule, the federal rule does not presume employee status. It uses two “core factors” to determine a worker’s status: (1) How much control is the worker able to exert over their work? (2) Are they able to earn more money by any means other than increasing their production or working more hours? The more control a worker has over their work and their income, the more likely a federal court will be to classify them as an independent contractor.
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Both federal and state employment laws in New Jersey protect employees’ rights to a minimum wage and overtime pay. While the federal Fair Labor Standards Act (FLSA) does not set the minimum wage as high as New Jersey law, it provides workers with useful enforcement tools. A worker can bring a “collective action” on behalf of other workers with similar federal wage and hour claims. An FLSA collective action is similar to a federal class action, with a few important differences. A recent decision by the Third Circuit Court of Appeals limits the use of FLSA collective actions when the plaintiffs come from more than one state. The ruling should not affect collective actions in which all members of the group are from New Jersey. If you have concerns about possible wage or overtime pay violations, make an appointment with a New Jersey employment lawyer today.

The most recent increase in the federal minimum wage occurred over twelve years ago. It reached its current level of $7.25 per hour on July 24, 2010. The rules for overtime compensation, which require payment at time-and-a-half for time worked over forty hours in a week, have remained the same for decades. These rules only apply to employees who are not exempt under the FLSA. They also do not apply to independent contractors. A wrongful claim that an employee is either exempt or an independent contractor is a violation of the FLSA known as employee misclassification.

The FLSA allows employees to file lawsuits against their employers for alleged wage and hour violations. Notably, § 16(b) of the FLSA allows employees to file suit on their own behalf and on behalf of “​​other employees similarly situated.” The requirements for a collective action under the FLSA are similar to those for a class action under Rule 23 of the Federal Rules of Civil Procedure. One important difference is that, while many class actions automatically include people who meet the description of class members and receive notice of the suit, the FLSA requires all plaintiffs to consent to participation in a collective action in writing. To put that another way, people may have to “opt out” of a class action and “opt in” to a collective action.
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New Jersey’s employment laws guarantee a minimum wage and overtime compensation for millions of workers. They protect employees from various forms of discrimination and harassment in the workplace. They bar employers from retaliating against workers who object to unlawful or unethical conduct. In order to enjoy the benefits of state and federal employment laws, however, a worker must be an “employee.” The definition of “employee” can be ambiguous and subject to debate. Employers may try to describe an employee as an independent contractor in order to avoid obligations set by state wage and hour laws and other statutes. New Jersey has developed a test for determining whether an individual is an employee. A federal judge recently granted summary judgment for a plaintiff in a wage and hour dispute.

Wrongfully categorizing an employee as an independent contractor is known as “employee misclassification.” It is considered a violation of wage and hour laws when an employer does it in order to avoid obligations established by those laws. New Jersey has adopted the “ABC test” to determine whether a worker is an employee or not. The test receives its name from the definition of “employment” found in New Jersey’s Unemployment Compensation Law at N.J. Rev. Stat. § 43:21-1(i)(6)(A) through (C).

A worker is presumed to be an “employee” under the ABC test unless they meet all three of the following criteria:
A. The employer does not exercise “control or direction” over the worker’s job duties and job performance.
B. Either the services the worker performs are “outside the [employer’s] usual course of…business,” or they perform those services “outside of all the [employer’s] places of business.”
C. The worker’s services are normally part of their own “trade, occupation, profession or business,” which is separate from the employer’s business.
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The Fair Labor Standards Act (FLSA) establishes a national minimum wage and sets standards for overtime compensation. While New Jersey has set a higher minimum wage than the federal rate, the FLSA still plays a critical role in many New Jersey wage and hour disputes. It allows workers to file “collective actions,” which are similar in many ways to class actions. A petition for certiorari is currently pending before the U.S. Supreme Court and asks the justices to address ambiguity in the FLSA’s provision on collective actions. The employer in the case filed the petition in August 2020, but both parties have asked the court to defer consideration of the petition while they engage in settlement negotiations. If they reach a settlement, the employer has indicated that it will withdraw the petition, meaning that the court will not hear the case.

The federal minimum wage has been at its current level, $7.25 per hour, since July 2010. See 29 U.S.C. § 206(a)(1)(C). The provisions regarding overtime have remained largely unchanged since Congress first enacted the statute in 1938. Employers must pay non-exempt employees at one-and-a-half times their regular rate for work time during a week that exceeds forty hours. Id. at § 207(a)(1).

Employers who violate the minimum wage or overtime provisions of the FLSA may be liable for the amount of unpaid wages, plus an equal amount as unliquidated damages. If, for example, an employer withholds $1,000 in overtime compensation from an employee, a court may order them to pay that employee $2,000 in damages. The FLSA allows an employee to file suit on their own behalf and for other “similarly situated” employees who have consented in writing to inclusion in the lawsuit. Id. at § 216(b). The statute does not define “similarly situated.”

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