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Friday, April 17, 2026

ABC Is Not As Easy as 1-2-3: NJ Supreme Court Issues Independent Business Misclassification Decision - JD Supra

On August 2, 2022, the New Jersey Supreme Court in East Bay Drywall, LLC. v. Department of Labor and Workforce Development, issued a unanimous opinion holding that workers, hired on a need and availability basis, who used their own equipment and provided certificates of insurance and business entity registration information, were employees of a drywall installation business and not independent contractors as the company claimed. The Court also held that whether or not the workers could “join the ranks of the unemployed” when the relationship with the company ends directly impacts independent contractor status in New Jersey.

Facts

East Bay Drywall LLC (East Bay) stopped reporting wages to the New Jersey Department of Labor and Workforce Development (NJDOL) in 2013. As a result, the NJDOL sent an auditor to analyze the status of workers hired between 2013 and 2016. The NJDOL interviewed leadership and requested documentation to determine whether the workers’ subcontracting businesses were each independent entities, or if they should have been considered employees, subject to salary requirements. The auditor, applying the ABC Test, determined that 16 subcontractors should have been classified as employees, and as a result ordered payment of unpaid unemployment and disability contributions, as well as interest and penalties for the years in question.

Under the ABC Test, all 3 prongs of the following criteria must be satisfied in order to establish non-employee status:

  1. The...


Read Full Story: https://www.jdsupra.com/legalnews/abc-is-not-as-easy-as-1-2-3-nj-supreme-4495...