The Distinction Between an “Employee” and an “Independent Contractor” is Critical in New Jersey Employment Law Claims

Numerous laws at the federal, state, and city levels protect employees from a wide range of adverse acts by employers, including discrimination, harassment, withholding of pay, and unreasonable or excessive work hours. Whether the remedies offered by a particular law are available to you depends on two factors: whether your employer is an “employer” within the meaning of this specific law, and whether you are considered an “employee” or an “independent contractor.” The definitions of “employee” and “independent contractor” vary from one state to another, but they are critically important to assessing a potential employment law claim. Many laws are limited to employers with a minimum number of employees. The definition of “employee” in a given situation, by determining how many employees an employer has, could also determine whether or not it is subject to certain employment statutes. As more and more employers seem to be trying to classify workers as independent contractors, and more and more workers are fighting back in court, understanding the distinction between “employee” and “independent contractor” is extremely important.

Some employment laws limit their application based on a minimum number of employees or other factors. The federal Family and Medical Leave Act (FMLA), for example, only applies to employers with 50 full-time employees or more. 29 U.S.C. § 2611(4)(A)(i). New Jersey’s employment statutes have broader applicability within the state. The Wage and Hour Law, which covers the minimum wage and other matters, does not limit its application based on the employer. Certain provisions, however, do not apply to minors and workers in certain specific occupations. N.J. Rev. Stat. § 34:11-56a30.

Employment statutes do not offer particularly helpful definitions of “employee,” as opposed to “independent contractor.” The New Jersey Wage Payment Law, for example, simply defines an employee as “any person suffered or permitted to work by an employer” who is not an independent contractor or subcontractor. N.J. Rev. Stat. § 34:11-4.1(b). The U.S. Supreme Court noted that a federal statute’s definition of “employee” was “completely circular and explain[ed] nothing.” Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323 (1992). It held that “traditional agency principles” should apply and used a multi-part test to determine whether the plaintiff was an “employee” that primarily looked at “the hiring party’s right to control the manner and means by which the product is accomplished.” Id., quoting Commun. for Creative Non-Violence v. Reid, 490 U.S. 730, 751 (1989).

New Jersey used a much broader definition of “employee” earlier this year in Hargrove v. Sleepy’s, LLC, No. A-70 Sept. Term 2012, 072742, slip op. (N.J., Jan. 14, 2015). Noting that neither the Wage and Hour Law nor the Wage Payment Law contained a useful definition of “employee” as contrasted to an “independent contractor,” it applied a test derived from the state’s retirement law, N.J. Rev. Stat. § 43:21-19(i)(6). The “ABC test” identifies an “independent contractor” based on three elements: (1) the worker is free from the employer’s “control or direction” over their work; (2) the work is either outside the usual course of the employer’s business, or is performed away from its usual place of business; and (3) the worker ordinarily works in an “independently established trade, occupation, profession or business.”

The Resnick Law Group’s employment discrimination attorneys advocate for workers and job seekers in New Jersey and New York. To schedule a confidential consultation with a member of our team to discuss your employment law matter, contact us today online, at 973-781-1204, or at (646) 867-7997.

More Blog Posts:

New Jersey Supreme Court Applies Broad Definition of “Employee,” Including Many Normally Classified as Independent Contractors, The New Jersey Employment Law Firm Blog, April 22, 2015
$2.3 Million Settlement Resolves Misclassification, Overtime Dispute Between Exotic Dancers and Clubs, Leaves Question of Whether They Were Employees or Independent Contractors Unanswered, The New Jersey Employment Law Firm Blog, March 5, 2015
Current and Former NFL Cheerleaders Sue Teams for Wage Violations, The New Jersey Employment Law Firm Blog, September 9, 2014

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