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.


However, on November 7, 2019, New Jersey Senate President Steve Sweeney introduced Bill S4204 to amend the language of N.J.S.A. 43:21-19(i)(6). If the bill is passed, an individual will be considered an employee unless (1) the individual’s service is outside the usual course of the business for which the service is performed; and (2) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the work performed. The proposed law would protect individuals through application of the employment statutes discussed earlier in this article to which independent contractors are not currently subject to. By approving the suggested amendments in Bill S4204, the New Jersey Senate will be making it much harder for companies to misclassify individuals as independent contractors. Therefore, while the entertainer in the earlier hypotheticals would still be considered an independent contractor if the newly proposed legislation is passed, the private caterer and IT specialist would be considered employees. As a result, the IT specialist and the caterer would be able to enjoy the same rights and benefits as the employees of the respective businesses that hired them, including, but not limited to, unemployment benefits, temporary disability benefits and workers compensation benefits.

At Mashel Law LLC, we are well experienced in handling Wage and Hour misclassification claims, as well as unemployment and disability benefits claims. If you believe you are currently being denied proper wages or insurance benefits by your employer due to misclassification, call the attorneys at Mashel Law (732) 536-6161 or fill out the contact form on this page for immediate help. At Mashel Law, LLC, located in Marlboro, New Jersey, we are dedicated to protecting the rights of employees.

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