Neither the language of an employment agreement, nor the label an employer places on an employee, determines eligibility for unemployment benefits; rather, it is the substance of the business relationship which does. Law Office of Gerard C. Vince v. Bd. of Review, 2019 N.J. Super. Unpub. LEXIS 1846, (decided on September 4, 2019). In Vince, a law firm agreed to hire a “consulting paralegal” on a temporary basis to integrate their files onto a web-based computer software system. Id. at *2. The law firm identified which files it wanted integrated but never instructed the paralegal on how to do so; nor did it precisely determine when or where she would do so. Id. at *2-3. The paralegal was paid according to her chosen hourly rate based on the invoices she presented. To confirm their relationship, the law firm had the paralegal sign a Consulting Paralegal Understanding (CPU), stating that she was hired as “an independent contractor and as such are not an employee…subject to receive unemployment or other employee related benefits.” Id. at *3. However, when those services ended, she decided to file an unemployment benefits claim with the Department of Labor and Workforce Development (“DOL”) and was approved.
Generally, under New Jersey’s Unemployment Compensation Law (UCL), N.J.S.A. 43:21-1 to 24.30, employers are obligated to provide compensation benefits to eligible employees who have been terminated. However, if an employer can show the individual was not an employee, but rather a consultant providing specific services, and if the employer can meet the three-part “ABC test” as outlined in N.J.S.A. 43:21-19(i)(6), unemployment benefits may be denied. The ABC test requires the employer to demonstrate: (A) the individual retained has been and will continue to be free from the employer’s control or direction over the performance of such service; (B) the service performed is outside the usual course of services the business provides, or performed outside of the places where such services are performed; and (C) the individual is customarily engaged in an independently established occupation. See Schomp v. Fuller Brush Co., 124 N.J.L. 487 (Sup. Ct.1940); and Hargrove v. Sleepy’s, LLC, 220 N.J. 289, 305 (2015).
Pointing to the CPU, the law firm in Vince contested the DOL’s determination that the consulting paralegal was eligible for benefits. Both the Appeal Tribunal (“Tribunal”) and the Board of Review (“Board”) upheld the Department’s decision, stating that the CPU’s language was “not determinative,” and the firm did not satisfy each part of the ABC test. Vince at *3. On appeal, however, the Appellate Division (“Division”) reversed the above rulings, not because of CPU’s terms, but because after analyzing the totality of the factual circumstances, it was clear both the Tribunal and Board “made certain findings that are not accurate,” and the law firm satisfied all three elements of the ABC test. Id. at *5.