Yesterday, the New Jersey Supreme Court clarified the “ABC test” used to determine if a worker is an employee or an independent contractor. Specifically, it made it clear that just because someone works through their business is not enough to make them an independent contractor.
The case began with a random audit by the New Jersey Department of Labor (“DOL”). The DOL found 16 employees had been misclassified as independent contractors. On appeal, East Bay Drywall (“East Bay”) contested that 11 of them were employees.
The ABC test applies to determine if a worker is an employee or an independent contractor for purpose of several specific laws, including New Jersey’s unemployment compensation law, Wage Payment Act, Wage and Hour Law. Under it, a worker is an employee unless the company he or she worked proves all three of the following: