Articles Posted in Wage and Hour Law

In New Jersey, the difference between being classified by an employer as an employee as opposed to being classified as an independent contractor can make a world of difference regarding the scope of a person’s legal rights. Unlike independent contractors whose rights are established by mutually agreed terms contained in a contract, those who qualify for employment status are entitled by operation of law to a host of benefits and rights not available to an independent contractor, including, but not limited to, unemployment compensation benefits, temporary disability benefits, workers compensation benefits, and wage and hour rights. See generally for example New Jersey’s: Unemployment Compensation Law, N.J.S.A. 43:21-1 et. seq.; Temporary Disability Benefits Law, N.J.S.A. 43:21-25 et. seq.; Workers Compensation Laws, N.J.S.A., 34:15-1, et. seq., Wage and Hour Law, N.J.S.A. 34:11-56a et. seq. and Prevailing Wage Act, N.J.S.A. 34:11-56.25 et. seq. Therefore, it is of paramount importance for workers to qualify as an employee under state law in order to receive these benefits.

Under New Jersey’s current law, individuals will be considered independent contractors if (1) free from control or direction over the performance of services; (2) they provide a service that is either outside the usual course of that employer’s business or the service is performed outside the employer’s places of business; or (3) the individual is customarily engaged in an independently established trade, occupation, profession or business. This law, found at N.J.S.A., 43:21-1 to 24.4, deems individuals eligible for unemployment compensation benefits unless all of the criteria of the so-called “ABC test” set forth in N.J.S.A. 43:21-19(i)(6)(A),(B),(C) is satisfied. All three parts of the test must be met for a person to be disqualified and the failure to establish any one of the three elements renders the claimant eligible for benefits. Philadelphia Newspapers, Inc. v Board of Review, 397 N.J. Super. 309 (App. Div. 2007).

For example, as the law stands now, an entertainer employed by a hardware store to perform and sing for its customers at their annual holiday party would be considered an independent contractor. Similarly, if a fast food burger restaurant hired a caterer to provide food and services for all their parties outside of its restaurants, that caterer would be considered an independent contractor. This is true even if the caterer was too busy catering these parties to be able to provide services to any other customer. Moreover, if a bank frequently hires an IT specialist to conduct software updates and repairs specifically relating to its buildings’ security systems but could provide the same services to other types of businesses, that individual would be considered an independent contractor.

America takes pride in its history of being a beacon for the labor class. Throughout its history, America has attracted waves of immigrants believing they could start a better and more prosperous life working in a thriving economy. Many of America’s greatest success stories began as a result of people getting an opportunity to work in a job providing a fair wage.  Fortunately for those who work in New Jersey, the New Jersey Wage and Hour Law (NJWHL) exists to “protect employees from unfair wages and excessive hours.” In re Raymour & Flanigan Furniture, 405 N.J. Super. 367, 376 (App. Div. 2009). The NJWHL expressly states that, “[t]he employment of an employee in any occupation in this State at an oppressive and unreasonable wage is hereby declared to be contrary to public policy and any contract, agreement or understanding for or in relation to such employment shall be void.”  N.J.S.A., 34:11-56a3. “Oppressive and unreasonable wage” is defined as “a wage which is both less than the fair and reasonably value of the service rendered and less than sufficient to meet the minimum cost of living necessary for health.” N.J.A.C. 12:56-2.1. A prime example of the NJWHL wage protections is found in our State’s overtime law which requires, “Every employer shall pay to each of his employees’ wages … for 40 hours of working time in any week and 1 1/2 times such employee’s regular hourly wage for each hour of working time in excess of 40 hours in any week …”  N.J.S.A., 34:11-56a4.

Unfortunately, due to insufficient budgeting, the New Jersey Department of Labor and Workforce Development (“NJDOL”) is currently experiencing a shortage of enforcement staff capable of charging those who violate the State’s NJWHL. Consequently, companies too often believe they can get away with violating New Jersey’s labor laws regarding wages, classification, and benefits. In turn, the NJDOL’s over-extension comes at a cost to those legitimate companies who are unwilling to take advantage of the situation by paying workers less or providing them less benefits. As New Jersey Senate Republican Leader Tom Kean recently stated, “[i]t’s hard for honest firms that follow the rule to compete for work when they’re paying the full wages, taxes, and insurance that their shady competitors often dodge.” However, to address this untenable situation, New Jersey State Senators Oroho [R], Kean [R], Troy Singleton [D] and Joe Pennacchio [R] are calling for the swift passage of Bill S-3954, establishing the creation of the Office of Labor Law Enforcement (“OLLE”) within the New Jersey Department of Labor and Workforce Development.

Hoping to foster fairer economic competition among businesses in the labor sector and “level the playing field,” the proposed legislation seeks to grant the OLLE referee-like authority to “oversee, evaluate, and coordinate enforcement activities of the department regarding violations of the provisions of labor laws, including provisions regarding wages and other terms and conditions of employment…the misclassification of employees, made by employers, employees, or other persons to wrongfully obtain or wrongfully deny or delay the full payment of wages and benefits, or pay less than the premiums, contributions, or taxes which are required by the provisions of State labor laws.” To ensure such enforcement, “[t]he bill directs the Attorney General, upon a request by the Commissioner of Labor and Workforce Development, to assign one or more deputy attorneys general to represent the department in proceedings regarding State labor law violations…”

After two years of litigation in federal court, U.S. District Court Judge Peter Sheridan ordered Wawa, Inc. (Wawa) to pay $1.4 million in order to settle a class action lawsuit filed against it by assistant store managers called “Assistant General Managers” (AGMs) who alleged violations of the Fair Labor Standards Act (FLSA). In January 2018, Plaintiffs moved to conditionally certify a collective action based on allegations that Wawa misclassified them along with other similarly situated AGMs as being exempt under FLSA i.e., not eligible for overtime pay, and by doing so, failed to pay them overtime for hours worked in excess of 40 hours per week. Gervasio v. Wawa, Inc., 2018 U.S. Dist. LEXIS 4899 (D.N.J. January 11, 2018).

In filing their 2017 complaint against Wawa, plaintiffs alleged they were deliberately “mislabeled” as managers under the FLSA when their duties did not actually reflect managerial duties and their duties were more akin to the duties of other hourly wage employees working at the stores. Id. at *2. However, because they were labeled as managers by Wawa, they were classified as exempt employees and therefore not entitled to overtime wages they would have otherwise earned under the FLSA. Id. Although Wawa eventually re-classified its AGMs as nonexempt employees in December 2015, plaintiffs continued to seek recovery of backpay for the unpaid overtime hours they worked prior to this reclassification. Plaintiffs claimed they worked between 50-55 hours during weeks in which they worked five or more shifts but did not get paid for any time worked exceeding 40 hours. Id.

While nonexempt employees, i.e., employees eligible to receiver overtime pay, are covered by the overtime protections of the FLSA, exempt employees are not. Exempt versus nonexempt employee status depends on three factors: (1) how much the employee is paid, (2) how the employee is paid, and (3) the type of work that the employee performs for his or her employer. Generally, an employee is exempt if he or she is paid at least $23,600 per year, is paid on a salary basis, and (3) performs exempt job duties, namely executive, professional, or administrative duties for the employer. To fall within the “executive exemption,” an employee must meet the following criteria: “(1) the employee receives compensation on a salary basis, (2) [his or] her primary duty is management of a recognized department, (3) [he or] she customarily and regularly directs the work of two or more employees, and (4) [he or] she has authority to hire or fire employees.” Id. at *7 (quoting Essex v. Children’s Place, Inc., 2016 U.S. Dist. LEXIS 108853 at *9 (D.N.J. Aug. 16, 2016)).

Plaintiffs attempting to sue Strategic Delivery Solutions LLC (SDS) in a class action suit over a myriad of violations of the New Jersey Wage Payment Law (WPL) and New Jersey Wage and Hour Law (WHL) must bring their claims individually through opaque private arbitration rather than as a class in open court before a jury of their peers according to an Appellate Division opinion published on June 4, 2019. Colon et. al. v. Strategic Delivery Solutions, LLC., 2019 N.J. Super. LEXIS 78. This is an unfortunate outcome for plaintiffs, who otherwise had strong claims for New Jersey wage law violations. When hired by SDS, plaintiffs entered into independent vendor agreements, which contained clear and unambiguous arbitration provisions. According to this appellate court, by signing these agreements plaintiffs gave up their rights to bring class actions claims, waived a jury trial, and agreed to binding arbitration. Colon at 4. Moreover, the appellate court concluded that even if the Federal Arbitration Act (FAA) does not apply, the New Jersey Arbitration Act (NJAA) does, and arbitration is required to settle these wage disputes.

In their initial suit filed in December 2016, plaintiffs alleged that from February 2015 to March 2016, they were working out of an SDS facility in Elizabeth performing truck driving and delivery functions for the company. They claim that SDS made unlawful deductions from their compensation in violation of the New Jersey Wage Payment Law during this time. N.J.S.A., 34:11-4.1 to 4.14. Additionally, plaintiffs allege that SDS misclassified them as independent contractors rather than employees and in doing so failed to pay them one-and-a-half hourly rate for any time they worked over forty hours per week in violation of the overtime provisions contained within the WHL. N.J.S.A., 34:11-56a to 56a38. Withholding wages and failing to pay employees the required one-and-a-half-hour overtime rate for excess hours worked are both serious abuses against New Jersey wage laws. Id. However, the Appellate Division agreed that plaintiffs must arbitrate their claims based on this arbitration provision, so sadly plaintiffs will not have their day in court.

Had the plaintiffs not entered into such agreements with the company, they would have had strong claims for a class action lawsuit against SDS for violating the New Jersey employment law statutes. The WHL was enacted to protect employees from unfair wage practices, such as giving employees excessive hours of work. N.J.S.A. 34:11-56a. Therefore, the distinction between independent contractor and employee, which is what plaintiffs are disputing in this case, is not a minor one in terms of application of the wage laws applicable to the employee-employer relationship. The WPL, which governs the time and mode of payment of wages due to employees, excludes independent contractors from its definition of “employee.” Hargrove’s v. Sleepy’s, LLC, 220 N.J. 289 (2015). Similarly, the WHL, which establishes a minimum wage or overtime rate payable to employees, does not do so for independent contractors. Neither the WPL nor its regulations differentiate between an employee and an independent contractor, however the New Jersey Supreme Court held that in distinguishing the two, courts may apply the ABC Test, which is taken from the New Jersey Unemployment Compensation Act. Id.

The federal Fair Labor Standards Act (“FLSA”) and the New Jersey Wage and Hour Law (“NJWHL”) protect the wages of New Jersey’s hourly workers. They do this by requiring employers to compensate hourly wage employees for each hour worked at a minimum wage rate (in New Jersey the minimum wage rate in 2017 is $8.44/hour), and to pay overtime wages at 1.5 times an employee’s regular hourly rate for each hour worked in excess of 40 hours in a workweek. This means that an employee is not permitted to work any time “off the clock” without pay even if the employee does so willingly.

Any time an employee is working for the employer he or she is required to be paid even when the employer did not ask the employee to work that time. For example, if the employer asks an employee to do a job and it takes the employee an extra hour to finish the job properly, the employee is entitled to overtime pay for that hour – even if the employer has a policy forbidding overtime pay. And if that hour means that employee has worked 41 hours in the workweek, the employee is entitled to 1.5 times her regular hourly rate for working that extra hour even if the employer has a policy forbidding overtime.

If an employee’s job requires him or her to wait around for an assignment, they must be paid for that time spent waiting. Indeed, even if the job is not to wait but merely to be “on call,” the time the employee is on call is to be considered work time warranting compensation. For example, if a job requires an employee to be available to respond to a security call, the time spent being on call must be compensated by the employer and can be calculated as part of work.

New Brunswick, N.J., November 1, 2016 – Brent Carter, Robert Haynes and Kenneth Cuoco, filed a class action lawsuit in Middlesex County Superior Court against Bed Bath & Beyond, Inc. (BBB) on behalf of themselves and all similarly situated current and former employees who worked in BBB stores located in New Jersey to recover for BBB’s failure to pay overtime wages in violation of The New Jersey Wage and Hour Law (NJWHL). The proposed Class consists of all persons employed by Defendant BBB in New Jersey who worked as either a Department Manager, Customer Service Representative, or Assistant Store Manager at any time two years prior to the filing of the lawsuit who worked over 40 hours per week and were not paid overtime pay at a rate of one and one-half times their regular rate for hours worked more than 40 hours during a workweek.

Carter, Haynes and Cuoco specifically complain that rather than Defendant BBB paying Plaintiffs and all other members of the proposed Class overtime pay at a rate of one and one-half times their regular rate for hours worked in excess of 40 hours during a workweek as required by the NJWHL, BBB instead unlawfully paid them and proposed Class members overtime pay based on a calculation which divided an employee’s base weekly salary by all hours worked in the week divided by 2 multiplied by all hours worked over 40 in the week.  The Complaint alleges that BBB unlawfully applied this Fluctuating OT formula to avoid paying their Department Managers, Customer Service Representatives and Assistant Store Managers overtime compensation at a rate required by law.  Indeed, the Complaint goes on to claim that by using its Fluctuating OT formula, Defendant BBB often paid Class members for hours worked over 40 hours in a week less than the State’s mandated minimum wage rate.

Plaintiffs’ attorney, Stephan T. Mashel, Esquire of the law firm of Mashel Law, L.L.C., located in Marlboro Township, New Jersey, said that his clients seek class certification and an award of money damages because BBB unjustly enriched itself by failing to pay its workers overtime pay at the legal overtime pay rate required under state law. As Mashel explains, “The overtime wage rate requirements contained in New Jersey’s Wage and Hour Laws benefits workers by dissuading employers from forcing employees to work excessively long hours. Such a disincentive has the salutary effect of promoting the health and quality of life of workers who value leisure and family time.  Conversely, these same overtime pay requirements afford workers the right to earn extra pay at a time when lower and middle class workers wages have remained stubbornly stagnant. BBB used its Fluctuating OT formula to defeat these public policy goals.”