Last week the New Jersey Supreme Court upheld a finding by the New Jersey Department of Labor and Workforce Development (“DOL”) that a drywall installation business failed to supply sufficient information to establish that 16 workers were independent contractors rather than employees. The East Bay Drywall, LLC v. Department of Labor & Workforce Development decision serves as an important reminder to New Jersey employers that a worker’s status is premised on the presumption that a worker is an employee unless and until an employer can prove otherwise, and employers must demonstrate that the worker qualifies as a contractor under all three (3) prongs of the ABC test. The ABC test, described below, is a fact sensitive analysis where the burden of proof rests with the employer to support its treatment of the worker as a contractor. East Bay Drywall obligates employers to prove that their contractors have a functioning independent business and emphasizes that even engaging a worker with a formal independent corporate structure is not dispositive of a contractor’s status. This decision demonstrates both how difficult it is for employers to justify a worker’s independent contractor status, and the necessity of employers to document the support for a contractor’s classification and be ready to produce it in response to DOL inquiries.
As we have previously explained, the New Jersey Supreme Court previously adopted the ABC test in its 2015 decision, Hargrove v. Sleepy’...
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