Additional Advice Needed on Independent Contractor Status

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One of the most common and frustrating issues employers face is whether workers are employees or independent contractors. This is a consequential issue with respect to taxes, benefits, legal obligations and protections, such as the applicability of anti-discrimination laws. This is a problem widely applicable to so-called small employers as well as traditional employers. This is a complex issue, especially for domestic employers, as different definitions of an independent contractor may apply depending on jurisdiction and purpose. For example, a worker who is properly treated as a contractor for tax purposes under the Internal Revenue Code could nonetheless be an employee for the purposes of workers’ compensation coverage under state law. It is also an evolving and contentious issue, as lawmakers and regulators consider limiting the circumstances in which a worker can be considered a non-employee, and everyone involved wonders how the existing rules can be applied to the new era of remote and hybrid employment.

Our Supreme Court recently entered the fray with its decision in East Bay Drywall LLC v. Department of Labor and Workforce Development (A-7-21, August 2, 2022), in the context of New Jersey’s unemployment compensation and temporary disability laws. Following the national trend against independent contractor status and recalling previous decisions, a unanimous court required rigorous proof under the ABC test and concluded that all the workers in question were employees. His decision provides useful advice to employers, but leaves an important question unanswered.

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