The New Jersey Department of Labor and the Attorney General have really declared war against the supposed scourge of misclassification of workers as independent contractors. The agency is making this effort on numerous fronts, such as the issuance of (numerous) Stop Work Orders and a seemingly incessant flow of audits, both from the Wage Hour Division and the Unemployment Division, to ferret out this alleged wrongdoing. Well, the State has expanded its aggressive approach to this issue. The Attorney General has filed the first lawsuit under a 2021 law that allows the State to file suit against a company for misclassification, rather than (just) the DOL auditing such employers. The case is entitled Asaro-Angelo v STG Logistics Inc. and was filed in Superior Court in Essex County,
The State has sued to stop the company from allegedly misclassifying more than three hundred (300) drivers as independent contractors. The suit seeks recovery of back wages (supposedly in the millions) as well as the assessment of penalties and fees. The Commissioner of the DOL explained the initiative in this manner: “Companies illegally profiting through corrosive business models at the expense of hardworking employees have been put on notice. We are proud to have the strongest worker protection laws in the country, which also safeguard employers who play by the rules. Misclassifying employees will not be profitable, nor overlooked.”
The New Jersey independent contractor test revolves around the so-called “ABC test.” That test contains three elements, all three of which must be met. The individuals must be free from control regarding the performance of their work; the work itself must be separate from the Company’s usual business or be performed outside the usual place of business; and, lastly, the individual must be in an independently established business (Note: This is the hardest prong to satisfy).
The State alleges that the misclassification caused the drivers to be paid less than the minimum wage. The State alleges the employer made numerous deductions, also illegal, which sometimes caused the workers to not receive any compensation for certain weeks. The Complaint alleges that the employer maintained far too much control over the drivers, which is a definite sign of an employer-employee relationship. The failure to carry sufficient workers compensation insurance, based on a theory that the workers were not “employees” is at the heart of this case.
The Attorney General noted the supposed deprivations that these allegedly misclassified workers were subjected to. He stated that “when employers unlawfully and callously toss their workers into the ‘independent contractor’ category they are not only depriving them of a steady paycheck, but they are also stripping them of earned sick leave, workers’ compensation, minimum wage, and more.” He then added that “these are national, profitable corporations with deep pockets who are padding their profits with illegal labor schemes, and they seem to have no plans to stop this kind of behavior.”
The Takeaway
Employers can be whipsawed under all of these different statutes. It is all the more reason for companies and (putative) employers to ensure, as far as they can, that the entities they are engaging, especially single individuals, have their own companies, are free of their day-to-day control and, most especially, have clients/customers other than themselves.
The NJDOL is coming…
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