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New Jersey employment law: as simple and complicated as ABC

The test to determine if someone qualifies as an independent contractor in New Jersey is as simple as “ABC.” Unfortunately, employment law here can also be as complicated as our infamous ABC test.

It is important for New Jersey employers to be careful about classifying someone as an independent contractor. Our ABC test is one of the strictest in the nation.

The state’s Department of Labor and Workforce Development lays out the ABC test. The person is an independent contractor if:

  • A. The person “has been and will continue to be free from control or direction” during their service contract
  • B. That “service is either outside the usual course of the business” for your company or that the “service is performed outside of all the places of business” for your firm
  • C. The person is “customarily engaged in an independently established trade, occupation, profession or business”

We read recently of a case that challenged that test, but the New Jersey Supreme Court refused to hear it. The lower court’s ruling found that exotic dancers are employees covered by New Jersey’s unemployment insurance laws.

An Appellate Division ruling said that the dancers were employees, with the panel of judges rejecting the argument that the dancers were independent contractors. In fact, the judges found that the club owner’s argument was “frivolous” after the club had made the point that dancers were not integral to its business.

The court stated that the argument contradicted the petitioner’s name (Dance Inc.), website contents and description of the club.

The Department of Labor had stated that “the dancers were presumed to be employees because they worked for tips.” The commissioner pointed to the ABC test – with an emphasis on C. The business had argued that the dancers signed stage rental agreements that stated that dancers are independent contractors that must rent their use of the stage.

Yet there was no rental fee in the English-language agreement. The language is important because the dancers spoke only Spanish or Portuguese.

The club also claimed it exercised no control over the dancers, yet their website referred to “our girls” and included schedules of when the various dancers would perform on different days at the club.

These matters can obviously be complex. It can make much more sense for a business to contact an employment law attorney who understands the nuances of the law and can help your enterprise craft employment contracts and policies that comply with New Jersey employment law and regulations.

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