Written by Ravi Sattiraju on April 9, 2019
We don’t know how we missed this story from May 2018. According to WHYY, governor Murphy has decided to crack down on worker misclassification, a response that is long overdue. He has convened a task force that is charged with finding new ways to monitor misclassification so that employers can be identified and punished.
Misclassification Harms the State and Other Businesses
Employers misclassify workers as “independent contractors” when they are really employees. The differences in treatment are significant.
For example, an employer must pay workers’ compensation insurance and unemployment insurance on their employees but not on independent contractors. An employer also needs to pay half of an employee’s FICA taxes, whereas they pay no taxes for their independent contractors.
As Governor Murphy has complained, businesses that misclassify gain an unfair competitive advantage over other businesses that follow the state’s labor laws. Those who illegally misclassify can cut their labor costs and undercut their competitors—all because they are cheating. Workers also lose out since those misclassified do not qualify for overtime compensation, for example, or for unemployment if they are laid off.
Governor Murphy has promised to get tough, stating that companies that misclassify will either “be brought into compliance” or else run out of business. We will see if the Governor is able to make good on this promise.
Workers Have Options
If you are a worker who thinks you have been misclassified, then you should take steps to address your situation. You might be entitled to compensation.
First, analyze whether you are an employee or an independent contractor under New Jersey law. The state uses different standards, depending on the context. But a common test used in wage and hour disputes is called the ABC test, under which a worker is an independent contractor only if:
- They have been and will continue to be, free from the employer’s control over the performance of their work.
- They perform work outside the normal course of business or outside the places of business.
- They are engaged in an independent trade, profession, or occupation.
For example, a florist might make bouquets for a large company to put in their office building. The florist has her own independent business and performs the work at her own site. She also is not controlled by the customer who hires her. In this example, the florist is an independent contractor.
However, a company might hire a secretary as an independent contractor. He works every day during normal hours at the company headquarters under the direction and control of the company president. The secretary does not have his own business or trade but works solely for the company. In this example, the company very well might label the secretary an “independent contractor,” but he does not qualify under the ABC test.
Contact a New Jersey Worker Misclassification Attorney Today
Misclassification hurts everyone—taxpayers, business, and not least the workers themselves. If you suspect you are being misclassified, contact us today. The Sattiraju Law Firm is a leading New Jersey law firm focusing on employment matters. We also consult with businesses to make sure they are accurately following the law.
Schedule a consultation by calling 609-799-1266.