The New Jersey Employment Law Firm Blog
A recent decision by the New Jersey Appellate Division serves as a stark reminder of the hurdles workers can face when seeking protection under the New Jersey Law Against Discrimination (LAD). In Sanger v. Next Level Business Services, Inc., the court affirmed that independent contractors—even those facing egregious allegations of harassment—fall outside the protective umbrella of the LAD.
The plaintiff, Nisha Sanger, was an experienced recruiter who performed services for Cognizant Technology Solutions through an agency agreement with Next Level Business Services (NLB). Her complaint alleged disturbing conduct: inappropriate physical touching by a supervisor and a subsequent “proposition” to engage in sexual relations with a high-level executive to secure her position. When she refused, she was terminated shortly thereafter. However, the court never reached the merits of these harassment and retaliation claims. Instead, the case turned on a single threshold question: Was Ms. Sanger an employee or an independent contractor?
In New Jersey, the legal test for employment status depends entirely on the statute being enforced. Unfortunately, the employee-friendly ABC Test used for wage and hour or unemployment claims does not apply to discrimination lawsuits. The New Jersey Supreme Court has explicitly held that while the ABC Test applies to the Wage Payment Law, the twelve-factor Pukowsky test remains the correct standard for cases brought under the LAD. The twelve factors under Pukowsky are:
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The employer’s right to control the means and manner of the worker’s performance: This is often considered the most important factor. It weighs toward “Employee” if the company tells you exactly how to do the work, whereas it weighs toward “Contractor” if they only care about the final result.
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The kind of occupation—supervised or unsupervised: If you are subject to day-to-day oversight, progress meetings, and manager approval for small tasks, it suggests an employee relationship. In this case, the court found the plaintiff had significant control over how she screened candidates, which favored contractor status.
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The level of skill: Highly specialized professionals with years of experience who do not require training are more likely to be viewed as contractors.
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Who furnishes the equipment and workplace: Providing your own tools and working from home favors contractor status. Conversely, being required to work at a specific desk using a company-provided laptop and email account typically suggests you are an employee.
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The length of time in which the individual has worked: A long-term, indefinite relationship suggests employment. A relationship with a “finite” or “limited duration”—such as the 12-month contract in this case—is more consistent with a contractor.
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The method of payment: Receiving a W-2 with taxes withheld is the hallmark of an employee. Being paid through a business entity (like an LLC) on a 1099 basis without withholdings strongly suggests a contractor relationship.
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The manner of termination of the work relationship: If the company can fire you at will for any reason, it may look like employment. If the relationship is governed by specific contract termination clauses (like a two-week notice requirement), it suggests a commercial contractor agreement.
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Whether there is annual leave: Paid time off (vacation or sick days) is a benefit reserved for employees. Not getting paid for days you don’t work is a strong indicator of a contractor.
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Whether the work is an integral part of the business of the “employer”: This looks at whether you are a “cog” in the company’s daily engine. If the work is “incidental” or “ancillary” to the company’s primary mission—like a recruiter for an IT company—the court may view you as a contractor.
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Whether the worker accrues retirement benefits: Participation in a 401(k), pension, or stock option plan is evidence of an employee relationship.
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Whether the “employer” pays Social Security taxes: An employer is legally required to pay half of an employee’s FICA taxes. If you are responsible for your own self-employment taxes, you are likely a contractor.
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The intention of the parties: This looks at what both sides believed they were creating. If the contract explicitly says “Independent Contractor” and you acknowledge that status in your testimony, it is very difficult to argue otherwise later.
These factors are weighed qualitatively rather than quantitatively, meaning the court looks at the overwhelming balance of the factors rather than just counting which side has more in their favor. While the first factor—employer control—is traditionally considered the most important, the weight assigned to each depends on the specific circumstances of the case. For example, in Ms. Sanger’s case, the court found the following facts highly persuasive and accorded them heavy weight:
- The Intention of the Parties: Ms. Sanger signed agreements explicitly designating her as an independent contractor.
- Method of Payment: Payment was made to Ms. Sanger’s business entity rather than to her individually, and no taxes were withheld.
- Control: While Ms. Sanger did use Cognizant’s equipment, the court found she maintained significant control over her recruiting duties and was not subject to day-to-day supervision regarding how candidates were sourced or screened.
Accordingly, Ms. Sanger was held to be an independent contractor and not subject to the protections of the LAD.
In discrimination cases, employment status may not be black and white. Courts look at the realities of your work, not just the title on your contract. If you have been subjected to harassment or discrimination but are unsure if your “contractor” status prevents you from seeking justice, you need a professional evaluation. Contact the Resnick Law Group today at (201) 781-1204 to provide your preliminary information and schedule a consultation with one of our experienced employment attorneys.