On August 6 of this year, the governor signed off on the new Wage Theft Law. While this law doesn’t mention worker’s compensation directly, it does draw attention to the fact that employers in New Jersey regularly misclassify workers.
The Department of Labor estimates that over 12,000 employees have been misclassified across the state, and that up to 30% of New Jersey employers engage in some form of employee misclassification.
They do this by claiming employees as independent contractors.
In addition to helping them skirt wage and overtime laws, misclassification makes it easier for employers to skip out on paying worker’s compensation insurance for those employees.
And while New Jersey does have an Office of Special Compensation Funds to help employees who weren’t covered by employers, you may find yourself in the position of having to prove you were misclassified if you wait until you need that money. It may be better to address issues of misclassification now, closing both worker’s compensation loopholes and loopholes which impact your pay.
To discover if you’ve been misclassified, you can use New Jersey’s ABC test.
Under the ABC test, you must meet three criteria to be considered an independent contractor.
- You must be free from the control and direction of the hiring entity. The entity might be able to express preferences from a list of service offerings, but independent contractors work when, where, and how they want. They aren’t penalized if they don’t show up according to an employer’s schedule, nor are they subject to manager reviews or internal quality controls. If the company doesn’t like the independent contractor’s work, they work it out like you’d work out a customer service problem, or they stop using the contractor.
- You perform work outside the course of the hiring entity’s business. The trucking industry is under fire right now because they’ve classified thousands of drivers as independent contractors. But the hiring entity’s business is trucking. If they’d hired thousands of accountants it might have been different.
- You are customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. So if you were one of the aforementioned independent accountants, you’d have an accounting business, probably with more than one client. You advertise that service to other clients and are free to offer it to other clients.
Note that nothing in the ABC test speaks of hours worked: you can work 40 hours for a single employer and still be an independent contractor. It would be a risky business practice, but you can do it.
The issue is the degree of control and the nature of your business versus the hiring entity’s business.
If you find you’ve been misclassified, you should report the employer. They will have 30 days to correct the problem. If they fail to, they’ll face criminal and civil penalties. The new law also strengthens the protections that keep employers from retaliating when you insist on being classified correctly. It would be risky for the employer to fire you, as doing so would make those penalties worse.