New Jersey is the next California in terms of independent contractor law. In 2023, New Jersey adopted the ABC test for classifying workers as employees or independent contractors. This means that workers are presumed to be employees unless the employer can prove all three of the following factors:
- The worker is free from the employer’s control or direction in the performance of the work, both under the contract of service and in fact.
- The worker performs work that is either outside the usual course of the business for which the service is performed, or that is performed outside of all the places of business of the enterprise for which the service is performed.
- The worker is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the work performed for the employer.
New Jersey’s adoption of the ABC test is part of a trend across the country. Several other states, including California, Massachusetts, and Illinois, have also adopted the ABC test in recent years.
Here are some additional implications of New Jersey’s adoption of the ABC test:
- Employers in New Jersey will need to carefully review their relationships with independent contractors to ensure that they meet the ABC test.
- Employers who misclassify workers as independent contractors may be liable for back wages and benefits, as well as penalties.
- Workers in New Jersey who are classified as independent contractors may be able to challenge their classification and seek employee status.
Back to the ABC test. It is incredibly difficult for companies contracting with couriers to pass the ABC test. First, it is a conjunctive test meaning that you need to pass all 3 factors. If you fail one, you do not meet the criteria required by the Department of Labor.
Part A: Does your company direct or control how couriers perform assigned work? Direction and control can include the following:
- Giving instructions
- Providing training
- Setting your work hours
- Telling you what tools or supplies to use while performing your work
- Hiring assistants
- Specifying your responsibilities
- Informing you of the sequence of your work (telling you to do certain things in a particular order)
- Having the right to fire you
Part B: Is the work 1) substantially different from their usual course of business, or 2) performed outside of your usual place(s) of business?
- Example for part 1: A worker installing a fence at a law firm’s office would be engaged in a different service than those usually provided by the law firm itself – unlike, for instance, a paralegal hired to assist lawyers in the office.
- Example for part 2: The facilities where physical and occupational therapists perform services – which are arranged through staffing contracts with the facilities – are considered integral parts of the business.
Part C: Are the couriers engaged in an independently established trade, occupation, profession, or business that could operate separately and apart from your company? Many factors influence whether work can exist separately and apart from the relationship, including – but not limited to:
- The amount of work and length of time worked for the current employer
- The number of workers employed by such individual
- Whether the individual pays its own expenses
- Whether the individual works for more than one person or firm
- Whether the individual uses its own tools, equipment, vehicles, or other materials
- The number of other customers and volume of business from other customers
- The amount of work received from the current employer compared to the amount of work received from others for the same services
FACTORS NOT MENTIONED ABOVE BUT KNOWN TO INSIDERS IS THIS:
Misclassification can also happen when an employer requires an employee to form an LLC or franchise before getting a job.
THE PENALTIES INCLUDE HEFTY FINES, CRIMINAL CHARGES, REPAYMENT OF WAGES (200%)
Take it from people in the know, having good contracts and arbitration clauses, including opt-outs, is crucial and having workers and contractors who actually understand their contracts is imperative. Is your business ready?
For more information and guidance, go to www.consultechclaims.com or call 518-689-2470 x140
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