Skip to Content
Speak to a Lawyer for Free. 732-440-3089

NJ Supreme Court Clarifies When Workers are Employees, Independent Contractors

independent contractors

In every Workers’ Compensation case in New Jersey, it is the burden of the injured worker to prove that their “injury arose from the course of the employment.”

As lawyers, we like to dissect every word, and one of the biggest challenges has always been figuring out what the word “employment” really means. For most jobs, this is relatively straightforward. However, as Door Dash, Uber, Lyft, and other app-based services have given birth to a growing number of “gig economy” type jobs, the Courts have struggled to define what exactly it means for someone to be an “employee” for Workers’ Compensation purposes.

Fortunately for workers, this question appears to have been recently answered in the New Jersey Supreme Court case of East Bay Drywall, LLC, v. Department of Labor and Workforce.

Court Clarifies ABC Test

The East Bay case involved a drywall installation business that had been audited by the New Jersey Department of Labor and Workforce Development (“DOL”) to determine if it was properly classifying workers and contributing to unemployment compensation and temporary disability funds as required by New Jersey law. The audit found that East Bay failed to supply sufficient information to prove that 16 of its workers were independent contractors, and the company was subsequently ordered to pay unpaid contributions, plus interest and penalties.

Following a series of appeals, the matter came before the NJSupreme Court. In its ruling, the Court upheld the DOL’s findings that East Bay misclassified 16 workers as independent contractors and additionally clarified the test – commonly referred to as the “ABC test” – used to determine when an individual is an employee.

Under the “ABC test,” an employer must presume that a worker is an employee unless the employer can show that:

  1. The employer neither exercised control over the worker nor had the ability to exercise control in terms of the completion of the work;
  2. The services provided were either outside the usual course of business or performed outside of all the places of business of the enterprise; and
  3. The individual is customarily engaged in an independently established trade, occupation, profession or business.

An employer’s failure to satisfy any one of those three criteria results in the worker being classified as an “employee” for wage payment and wage and hour purposes.

The Supreme Court did not go as far as to extend the East Bay case into the world of Workers’ Compensation, as it was not asked to do so. However, the case will likely provide important guidance in future matters involving worker classification. Under the Estate of Kotskovska case, the employee has the burden of proof to show they were an employee, and the court may use a variety of factors to determine employment, including the vague, “such other factors as may be reasonably considered” standard. Going forward, Workers’ Compensation Judges will have it as easy as “ABC” to determine whether an injured worker is an employee or an independent contractor.

Levinson Axelrod, P.A. represents clients across New Jersey in matters of workers’ compensation and personal injury. If you or someone you know have been injured on the job, call (732) 440-3089 or contact us online to speak with an attorney.