NJ Supreme Court Makes it Easier for Workers to Sue Over Independent Contractor Misclassifications

Date: January 16, 2015

On January 14, 2015, the New Jersey
Supreme Court ruled in Hargrove
v. Sleepy’s
that New Jersey will now apply the most favorable test for
workers who sue for independent contractor misclassification. The “ABC” test will
be the standard in resolving complaints about wages and overtime.  This ruling  makes it easier for contracted workers to sue
a business for wage and hour claims, including overtime

The “ABC” test can be challenging for employers. It
presumes an individual is an employee unless the employer can establish that:
(a) the individual is free from direction and control; (b) the individual provides
a service outside the employer’s usual course of business or places of
business; and (c) the individual is engaged in an independently
established trade, occupation or business.

The “A” prong of the test is
largely within the employer’s control. A true independent contractor would not
be subject to the same work requirements as an employee who has set hours, is
required to attend meetings, fills out company reports, and can be disciplined.
While the “A” prong of the test typically does not cause employers too much
angst, the “C” prong is problematic as it is largely outside a company’s control.

Employers should familiarize themselves with the ABC test, which is
already used in New Jersey’s unemployment compensation law. For additional help,
including a detailed discussion of the ABC test and a sample independent
contractor agreement, download the Small Business Legal Center’s “Guide to Independent Contractors” Members
can also call Beth Milito in the NFIB Small Business
Legal Center at (202) 406-4443.

Background: The
case concerned contracts between a mattress retailer, Sleepy’s, and three
drivers. Although Sleepy’s had independent contractor agreements with the
drivers, the drivers argued that they are actually employees of Sleepy’s and
not independent contractors.

NFIB’s Involvement:
The NFIB Small Business Legal Center filed an amicus brief in the case that
warned the court against adopting a challenging standard, like the “ABC test”
that would convert legitimate contracts between independent businesses into
employment contracts.

 

Related Content: Small Business News | New Jersey

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