Are You an Employee or an Independent Contractor?

Employment laws in NJ are numerous and vary widely in scope. No wonder employment law has evolved into a specialized area of legal practice involving employment law attorneys, human resource departments, and employer-employee consultants. Your classification as an employee is important for a number of reasons, including taxation; eligibility for coverage and protection under various state benefit and employment protection laws such as workers’ compensation, anti-discrimination prohibitions, the Wage Payment Law, the Wage and Hour Law, the Unemployment Compensation Law, and others. The legal criteria to determine whether you are an employee (or not) may not always be consistently applied. How can that be, you may ask? The answer is that courts in NJ have consistently held that certain laws (i.e., the Unemployment Compensation Law) allow for a far more expansive definition of an employee than would otherwise apply under New Jersey common law.

Strange but true. Let’s look at the generally accepted legal definition of an employee under NJ law.

An employee is a person affiliated with an entity (i.e., LLC, corporation, unincorporated trade name) who is hired to perform services for another, known as the employer, and who, in the performance of their services, is subject to the employer’s control or right to control the physical performance of the service performed (emphasis added).

The term(s) “control” or “right to control” mean the employer has the right to dictate the means and methods of performing a task, as compared to a much more limited right to control how the work is accomplished.

Under the control test, the employer retains the right to direct how, when, and where the work is to be performed, even if they choose not to fully control that work. The key words are “the employer can direct the work (not that the employer will actually dictate the manner of work but can). Compare an employee to an independent contractor.

An independent contractor is defined as ‘one who operates an independent business, contracts to do the work according to his or her own methods without being subject to the direct control of an employer as to the means by which the work is to be accomplished. In this example, the employer’s only control is to accept or reject the contractor’s work product. Again, it is this right to control that is determinative, not whether the right was, in fact, exercised.

Although control is perhaps the most important factor, it is not the only one in determining whether there is an employer-employee or independent contractor relationship.

That determination requires an evaluation of all the circumstances surrounding the relationship, including not only control but also the following factors:

Whether the employee works in a distinct yet commonly identifiable trade, profession, or occupation, and works for others, not just one employer;
The type of work/trade/occupation performed by the person and whether it is traditionally performed by an employee or by an outside party without supervision;
The degree of skill (or lack thereof) required;
Whether the employer supplies the materials, equipment, tools, and the physical place of work, or can direct from where the physical work is performed;
The duration of time of employment, whether contracted or at will;
The method and terms of payment;
Whether the work is part of the employer’s regular business, and
Whether the parties believe they are in a relationship of employer and employee.
The extent of control which, by agreement (expressed, written, verbal, or by assumption), the entity for which the services are being performed has the right to exercise control over the details of the services performed;
Whether the person performing such services is engaged in an occupation or business distinct from that of the entity for which services are performed (i.e., an HVAC technician fixing a leaking valve in the air conditioning system for an office building owner);
Whether the services rendered are usually done under the supervision and/or direction of the employer in a specific geographic location/work area, or whether such services are usually done by others without such control and direction.
The length of time anticipated for the performance of the services (hours, days, weeks, months, or longer) to complete the job;
Whether the entity for which services are to be performed is a profit-seeking business, and
Such other factors as may be reasonably considered in determining whether the entity for which the services are being performed controls, or has the right to control means and methods of the entity performing the services.

Social Legislation and Its Applicability to Being Deemed an Employee vs. Independent Contractor Classification

Social legislation is an ambiguous term. It is seldom defined when used. The reason for this lack of precise definition is that social legislation laws are a collective body of law (not a single law, per se) that seeks to promote the common good generally by protecting, assisting, and subsidizing a defined class of individuals considered to be in need of assistance in the employment world.

Social legislation in NJ appears to define an employee vs. independent contractor somewhat differently, depending on which law is cited and how that relationship is affected by that law. One published case defined an employee one way when the case was brought under the Conscientious Employee Protection Act, yet the New Jersey Supreme Court addressed the proper analysis for determining who is an employee vs. an independent contractor another way under the New Jersey Unemployment Compensation Law and the N.J. Wage Statute. The court relied upon the ABC test to justify its ruling. Under the ABC test, an individual is presumed to be an employee, unless it can be shown that all of the following are true:

(A) The individual has been and will continue to be free from control or direction in the performance of their service(s), both under any contract of service and in the reality of the working relationship; and

(B) The service being performed is either outside the customary scope of the primary business or service being performed, or the service being performed is outside of all the established places of business of the enterprise for which such service is performed; and

(C) The individual or entity is customarily engaged in an independently established trade, occupation, profession, or business.

As I stated previously, in NJ it is possible to be an employer or employee under one law and thereby eligible or ineligible for the beneficial inclusion or exclusion of a social legislation protection statute.

Determining whether you are an employee or an independent contractor is a threshold evaluation that employment counsel should undertake whenever an employment-related matter is being considered.

Many of the criteria for classifying a person or legal entity as an employer, employee, or independent contractor are highly fact and case-sensitive. The analysis (at times) can be somewhat subjective, and the legal outcome of the decision unpredictable. NJ generally tries to force an employer-employee relationship in order to collect more tax and related income.

Are you an employee or an independent contractor? If this page relates to you, please contact Fredrick P. Niemann, Esq. at (732) 863-9900 or email him at fniemann@hnlawfirm.com. Ask us about our video conferencing or telephone consultations if you are unable to come to our office. Mr. Niemann and Hanlon Niemann & Wright welcome your inquiries.

Fredrick P. Niemann Esq.

Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Employment Law Attorney

NJ Employment Law Attorney serving these New Jersey Counties:

Monmouth County, Ocean County, Essex County, Cape May County, Camden County, Mercer County, Middlesex County,
Bergen County, Morris County, Burlington County, Union County, Somerset County, Hudson County, Passaic County