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Worker Misclassification & New Jersey Law: Protect Your Right to Workers’ Compensation Benefits

misclassification of employees

Turn on the news or look at the headlines and there’s a good chance you’ll hear something about worker misclassification.

Thanks to several high-profile cases and court rulings in recent years – including those involving minor league baseball and rideshare services Uber and Lyft – attention has grown on how employers classify their workforce, and how misclassification hurts workers.

As a firm that fights for victims of workplace accidents, our team at Levinson Axelrod, P.A. knows how misclassification can deprive workers of the right to a minimum wage, family and sick leave, and important benefits like unemployment or workers’ compensation should they suffer injuries on the job. It’s why we supported a package of bills targeting misclassification signed into law last year, and why we’re happy to explain New Jersey law on the matter.

What is Worker Misclassification?

As defined by the New Jersey Department of Labor and Workforce Development (DOL), worker misclassification is the practice of an employer improperly classifying workers as independent contractors rather than employees.

While some employers may mistakenly classify workers as independent contractors, others do so intentionally to save money. In either case, employee misclassification is prohibited under New Jersey law and deprives workers of important rights, benefits, and protections guaranteed to employees. This includes:

  • The right to be paid a minimum wage and overtime pay
  • Time and mode of pay protections
  • Protection against illegal pay deductions
  • Unemployment benefits
  • Family leave, family leave insurance benefits, and earned sick leave
  • Temporary disability and workers’ compensation benefits

Independent Contractor vs. Employee: What’s the Difference?

Businesses may pay independent contractors and employees to do the same or similar work, but there are important legal differences between the two classifications. The primary two are that companies withhold income tax, Social Security, and Medicare from wages paid for employees but not for independent contractors, and that employment and labor laws do not apply to independent contractors.

In New Jersey, workers are presumed to be employees unless employers can prove the following three things:

  1. You are and will continue to be free from direction or control over your work.
  2. The service you perform is either (a) outside the usual course of business for which such service is performed, or (b) performed outside of all places of business of the enterprise you serve.
  3. You are engaged in an interpedently established occupation, trade, profession, or business.

This is known as the “ABC Test” and is used to determine which workers qualify for independent contractor status. It is the employer’s burden to prove all three parts of the ABC test. If they cannot establish all three elements – even if you receive a 1099 and even if you signed an Independent Contractor agreement – you are deemed an employee and are entitled to the above rights, protections, and benefits under New Jersey law.

The appropriateness of the ABC Test was confirmed by the New Jersey Supreme Court in Hargrove v. Sleepy’s in 2015, in the context of wage-payment and wage-and- hour claims. While the ABC Test has yet to be explicitly adopted in a published Worker’s Compensation opinion, the overlapping nature of the law is clear. Ultimately, a Judge of Worker’s Compensation may use these factors, and even more, to determine whether an injured worker is entitled to benefits for injuries arising out of their employment. As the amount of control, the employer exercises would be the most important factor, it is important that if you have any questions about your status that you contact the lawyers at Levinson Axelrod to fully discuss your claim.

You can learn more about the factors for each component of the ABC test here.

What Happens When Employers Misclassify Workers?

If a state agency or court finds that an employer misclassified a worker as an independent contractor, employers can face penalties imposed by the Department of Labor and be ordered to pay back pay to employees deprived of minimum wage and / or overtime pay, or who had pay subject to illegal deductions. Employees are protected from retaliation by their employers for making a complaint.

Your Right to Workers’ Compensation After an Accident

The evolution of our labor laws has afforded workers with many important rights and protections, including the right to receive workers’ compensation benefits when they are injured in the course of their employment.

At Levinson Axelrod, P.A. our workers’ compensation team is available to help workers across the state following all types of work-related accidents. We’re also available to speak with independent contractors who want to learn more about their options after a workplace injury and whether they might also be entitled to benefits as a result of being misclassified by an employer. To speak with an attorney, call (732) 440-3089 or contact us online.