Newark, New Jersey Misclassified Workers

Newark, New Jersey Misclassified Workers

Determining whether to classify a worker as an employee or as an independent contractor is not always an easy decision. However, the economic consequences for an employer can be significant. And misclassified employees can lose out on important benefits, such as unemployment compensation and overtime pay. If you need help classifying employees—or if you think you have been misclassified—you need an experienced Newark, New Jersey employment lawyer in your corner.

The Economic Consequences

Employers are responsible for a host of expenses if a worker is an employee but not an independent contractor. For example, an employer will need to pay the following for employees:

  • Overtime pay
  • Employer’s share of FICA taxes
  • Unemployment compensation tax
  • Workers’ compensation insurance
  • Employee benefits, such as holiday, vacation, and sick pay

By classifying a worker as an independent contractor, Newark employers can save thousands of dollars a year. Unfortunately, there are dangers that employers will misclassify intentionally to save money.

Employee versus Independent Contractor under Federal Law

According to the Department of Labor (DOL), whether a worker is an employee or independent contractor for federal purposes depends on a consideration of several factors:

  • How permanent is the relationship? The more permanent, the more likely the worker is an employee.
  • How integral is the worker’s product to the business? The more integral, the more likely the person is an employee.
  • What is the nature and extent of the control exercised over the worker? Control can include telling a person how to do their job and when to do their job. The more control an employer exerts, the more likely the worker is an employee.
  • Whether the alleged independent contractor invests in equipment, supplies, and facilities. If the person does, then they are more likely an independent contractor.
  • The opportunities for the independent contractor to engage in other business opportunities.
  • The amount of foresight, judgment, and initiative for the alleged independent contractor’s success.
  • The amount of independent business operation and organization. For example, if the alleged independent contractor has incorporated their own business, then they are less likely to be an employee.

However, some factors are irrelevant, such as where the person works, whether they are licensed by the state, and whether the employer has a written agreement with the alleged independent contractor.

Employee versus Independent Contractor—New Jersey Law

Generally, New Jersey uses a three-prong test (called the “ABC test”) for determining if someone is really an independent contractor. The factors consider:

  • Whether the worker is free from control and direction
  • Whether the worker provides services outside the employer’s course or places of business
  • Whether the worker is engaged in an established business, occupation, or trade

Although New Jersey’s test overlaps the federal test in many ways, employers must independently analyze each employee under both tests.

Both the federal and New Jersey governments have made it a priority to root out worker misclassification. For example, New Jersey’s Department of Labor and Workforce Development audits about 3% of the state’s employers to make sure classifications are proper. Employers found in violation could be charged with a crime and fined thousands of dollars each day they are in violation.

Workers and employers worried about misclassification should schedule a consultation with the Sattiraju Law Firm today. We have significant experience, particularly in the trucking industry.

Speak with a Newark, New Jersey Employment Lawyer

Both the federal and New Jersey governments have made it a priority to root out worker misclassification. For example, New Jersey’s Department of Labor and Workforce Development audits about 3% of the state’s employers to make sure classifications are proper. Employers found in violation could be charged with a crime and fined thousands of dollars each day they are in violation.

Workers and employers worried about misclassification should schedule a consultation with the Sattiraju Law Firm today. We have significant experience, particularly in the trucking industry.