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.
The DOL published the rule establishing this test on January 7, 2021, less than two weeks before a new administration took over at the White House. A bit of drama ensued over the following year. The new leadership at the DOL withdrew the rule in May 2021. A lawsuit challenging the legality of the withdrawal resulted in a court order reinstating the rule in March 2022.
On October 13, 2022, the DOL published a proposed rule in the Federal Register intended to replace the current rule. The new rule would drop the “core factor” test in favor of an “economic reality” test that looks at a worker’s “economic dependence” based on six factors:
1. Does the worker’s success or failure in their job depend on “managerial skill”?
2. Does the worker provide their own tools or equipment?
3. Is the employment relationship indefinite in length, or does it have a specific end date?
4. How much control and supervision does the employer exert over the worker?
5. Are the worker’s services “an integral part of the employer’s business”?
6. Does the worker use “specialized skills” that they acquired on their own, meaning not through on-the-job training by the employer?
Workers in New Jersey and New York who have disputes with their employers need skilled advocates to advise them of their rights and guide them through the legal process. The Resnick Law Group’s employment attorneys can answer your questions and address your concerns. To schedule a confidential consultation, please contact us today online, at 973-781-1204, or at 646-867-7997.