It is a common issue amongst some of the biggest companies in the country — misclassifying employees as independent contractors, which can then lead to litigation from employees who have been unfairly denied benefits, as well as from government entities over tax payments. It is a serious issue that involves a number of areas of law, including business law, employment contracts and law, wage and hour classification, and whistleblowing and retaliation.
Uber is the latest company to be affected by the issue: In November, New Jersey determined that the company and its subsidiary Rasier owed the state more than $640 in penalties and taxes due to misclassifying its drivers and independent contractors for years.
A number of workers are hailing the decision as a victory in their fight for better working conditions from the company. While some work part-time, others allegedly work long hours without being paid fair wages or overtime. Many have pointed to the misclassification as the reason that they cannot afford basic necessities such as a place to live, as well as healthcare, family leave, unemployment compensation, disability, and other benefits. Uber, however, is challenging the determination.
Determining Whether Someone is an Employee or Contractor in New Jersey
In New Jersey, determining whether a worker is an employee or independent contractor is based on what is known as the ABC test. It presumes that someone is an employee unless the employer can show that:
- The employer does not exercise control over the worker or the completion of the work;
- The services provided were outside the usual course of business or the places of business of the company; and
- The individual’s profession will persist even if the relationship is terminated (they have the control in terms of every aspect of their business – i.e. the employer can only dictate the finished product, not the means by which it is accomplished.
Failure to satisfy any of these criteria results in the worker being classified as an employee.
The state is becoming more and more involved because taxpayer funds have to cover disability and unemployment insurance when independent contractors file for benefits. Meanwhile, the mandate that workers must be classified as employees instead of contractors has long haunted investors in companies like Uber precisely because the company’s business model is entirely built on treating workers as independent contractors.
It is important to be aware that New Jersey has a number of laws in place to protect workers’ wages, including the New Jersey Prevailing Wage Act, which protects those that work for government contractors and public works by establishing a prevailing wage and preventing workers from being exploited.
Contact Our New Jersey Employment Lawyers with Any Questions
The employment law attorneys of McOmber & McOmber, P.C. provide experienced, knowledgeable, and committed representation and legal advice to both employers and employees in a number of legal areas. We pride ourselves on not only helping our clients with disputes, but in helping to prevent them by advising clients on how to protect themselves. Contact us at our New Jersey offices today to find out more.