The issue of who is and who is not an independent contractor has exploded on the legal scene in recent years. Many agencies are honing in on this topic and I have, over the last five years, probably defended more than fifty audits, inspections and lawsuits involving this issue. Well, the landscape just got murkier, or more difficult for employers as the US Department of Labor and the NJ Department of Labor have just signed a cooperation agreement to target the misclassification of individuals as independent contractors in New Jersey.
This memorandum of cooperation will enhance enforcement efforts by facilitating the coordination of investigations by the agencies as well as sharing resources. The agencies want to send a “strong message” to the business world that misclassification laws “are being strictly enforced.”
Commissioner Robert Asaro-Angelo stressed that his agency’s strong goal is to ensure that workers are shielded from “unscrupulous business practices.” He stated that “this partnership with U.S. DOL will help ensure that our business partners and the state’s workers all get the protections they deserve.” The sectors most amenable to misclassification problems are the construction, transportation and information technology. The new so-called gig economy is also a focus of these issues.
Mark Watson, of the USDOL stated that the agreement “will amplify the effectiveness of both agencies.” He added that “the U.S. Department of Labor looks forward to improving coordination and increasing joint outreach and compliance assistance efforts with all of our state partners.”
This agreement follows an earlier New Jersey initiative where the Governor announced he wanted to take a harder line on this misclassification issue. That initiative was the establishment of a cross-agency task force to focus on the problem of misclassification. Finding more people to be true “employees” would generate more money for the State
I know a lot of employers classify people as independent contractors when, perhaps, they should not be. I also know that a lot of these individuals want those relationships to exist as one of independent contractor status. In New Jersey, under the strict ABC test, it was very difficult to win on the third prong, the “independently established business” prong, until the advent of the Garden State Fireworks case. We will see where that goes.
But, employers now need be aware if they are found to have violated the New Jersey unemployment statute on independent contractor, they may find the USDOL alleging that under that statute, the workers are really employees.