In East Bay Drywall, LLC v. Department of Labor & Workforce Development 2022 N.J. LEXIS 671 (2022) the New Jersey Supreme Court reaffirmed that an alleged employer must satisfy each element of the ABC Control test to establish they properly classified their workers as independent contractors as opposed to employees. N.J.S.A. 43:21-19(i)(6)(A) to (C). The specific question before the Supreme Court was whether a drywall installation company named East Bay Drywall had properly classified its workers hired on a per job basis as independent contractors under New Jersey’s Unemployment Compensation Law. Following an audit performed by the Department of Labor and Workforce Development (DLWD) finding some of those working for East Bay Drywall were improperly classified as independent contractors, the company appealed the findings which made its way to the Commissioner of the DWLD who concluded that the sixteen workers at issue were misclassified by East Bay Drywall as independent contractors. Further appeals of the Commissioner’s decision eventually ended up before our state’s highest court where it was concluded that East Bay Drywall failed its burden to satisfy each element of the ABC test.
The text of N.J.S.A. 43:21-19 establishing the ABC test reads as follows:
Services performed by an individual for remuneration shall be deemed to be employment . . . unless and until it is shown to the satisfaction of the division that:
(A) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and
(B) Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
(C) Such individual is customarily engaged in an independently established trade, occupation, profession or business.
The Court explained that the ABC test is conjunctive, meaning all three elements must be established for a worker to be considered an independent contractor. The ABC test presumes a worker is an employee. Hargrove v. Sleepy’s, LLC, 220 N.J. 289, 305 (2015). The Court in East Bay Dry particularly focused on Prong C of the ABC test stating that it asks whether a worker can maintain a business independent of and apart from the employer. If the worker “would join the ranks of the unemployed” when the relationship ends, the worker cannot be considered independent under prong C. Carpet Remnant Warehouse, Inc. v. N.J. Dep’t. of Labor, 125 N.J. 567, 585-86 (1991). In some cases, it will be obvious that a worker was entirely dependent upon an employer because, when the working relationship ends, the worker is fully unemployed. In other cases — where it is not as clear that the worker will be unemployed without the working relationship — other factors may be illustrative of the underlying public policy at stake. For such situations, case law provides a variety of factors to be considered when evaluating a worker’s “ability to maintain an independent business,” and the Court reviews those factors, including the factors set forth in Carpet Remnant, 125 N.J. at 592-93.
The Court ultimately upheld the Commissioner’s findings because East Bay Drywall did not supply sufficient information to prove the workers’ independence under the ABC test. In finding so, the Court was satisfied that all sixteen workers in question were properly classified by the Commissioner as employees, and it remanded the case back down to the DWDL for calculation of the appropriate back-owed contributions.
At Mashel Law we are well experienced in handling New Jersey wage and hour misclassification and unpaid wages claims, as well as unemployment insurance appeals. If you have been denied wages legally earned or unemployment benefits, 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.