Employees or Independent Contractors? New Jersey Governor Establishes Task Force to Crack Down on Employee Misclassification

Employees or Independent Contractors? New Jersey Governor Establishes Task Force to Crack Down on Employee Misclassification

May 10, 2018

On May 3, 2018, New Jersey Governor Phil Murphy signed an Executive Order establishing the Task Force on Employee Misclassification (the "Task Force").  New Jersey already applies the more onerous "ABC test" for classification of a worker as an independent contractor.  Now Governor Murphy has created a Task Force to specifically focus on this issue, stating that  misclassifying employees as independent contractors "deprives New Jersey workers of important legal rights and protections as well as certain employment-related benefits," and harms law-abiding business and the state’s economy.  This is another, in a series of actions by the newly elected Governor to increase employee protections in the Garden State. (Our blog on the New Jersey Equal Pay Act can be found here, and our blog on the New Jersey Paid Sick Leave Act can be found here.)

In 2014, the New Jersey Supreme Court rendered an unanimous decision holding that the that the appropriate standard for determining employment status under the New Jersey Wage Payment Law and the New Jersey Wage and Hour Law is the three-part "ABC test," which historically has been used in the unemployment context.  In doing so, the Court expressly rejected the "economic realities" test applied for determining employment status under the Fair Labor Standards Act.  Accordingly, in New Jersey a worker is presumed to be an employee unless the would-be employer can demonstrate and satisfy three specific factors described herein.  Failure to satisfy any one of the three criteria results in classification as an employee. You can read more about this decision and the "ABC" test here.

The newly established Task Force is responsible for giving advice and recommendations to the Governor’s Office and Executive branch departments and agencies on how to prevent and combat employee misclassification. In the Order, the governor states there are well-established legal standards to differentiate between employees and independent contractors, the classification of which "carries significant legal and practical ramifications." Misclassification also makes organizing and collectively bargaining more difficult, as independent contractors are not covered under the National Labor Relations Act. The Task Force will examine and evaluate executive departments' and agencies' existing misclassification enforcement, develop departments' and agencies' best practices to increase coordination of information and efficient enforcement, develop recommendations to promote compliance with existing law, such as through educating employers, employees, and the public, and review existing laws and procedures regarding misclassification.

The Task Force will be comprised of three representatives from the Department of Labor and Workforce Development, three representatives from the Department of the Treasury, and one representative from each of the Department of Law and Public Safety, the Department of Agriculture, the Department of Banking and Insurance, the Department of Human Services, the Department of Transportation, and the Economic Development Authority.

Employers should carefully review the status of their employees and independent contractors to ensure they are compliant under existing law. Contact us at Saul Ewing Arnstein & Lehr with any questions regarding misclassification of employees, or to discuss a review of your current employee policies.