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Construction, Building, Build, IndustrySmall business and contractors often hire independent contractors rather than employees for certain projects and services. Generally, this allows the business to avoid responsibility and expense related to withholding and paying taxes, and obtaining insurance for those workers. However, case law in New Jersey over the years has slowly been narrowing the definition of who may qualify as an independent contractor.

In 2015 for example, the New Jersey Supreme Court decided the case of Hargrove v. Sleepy’s LLC.  In that case, the Court found that, when defining a worker as an employee or independent contractor in relation to wage and hour or wage payment claims. The courts will consider the factors set forth in the “ABC” Test. The ABC test considers: (1) the control exercised by the employer of the worker’s work, (2) whether the services performed by the worker were outside the usual course of the employer’s business or performed outside the employer’s place of business, and (3) whether the individual worked in an independently-established business or occupation. So, in order to be an independent contractor, the worker had to be: (1) free from the employer’s control, (2) working away from the employer’s place or business OR working in an area outside the area of work generally conducted by the employer, AND (3) customarily engaged in his/her own established business or profession.

In November of 2019, a new bill was introduced in the New Jersey Senate proposing to limit the use of the independent contractor classification for workers even more. In relation to the second prong, workers could not qualify as independent contractors by physically working outside of the place of business of the employer; the worker would have to provide a service to the employer which is outside the usual course of the employer’s type of business.

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New Home, Construction, For Sale, Buy
In October 2019, the Appellate Division of the Superior Court of New Jersey issued an opinion in the case of Becker v. Ollie Solcum & Son, Inc., examining the enforceability of an arbitration clause in a construction project.  The decision continued the trend in New Jersey of limiting enforcement of arbitration agreements, particularly where one party is a customer.

The case arose from a dispute over a residential construction project. Robert and Catherine Becker entered into a contract with Ollie Slocum & Son, Inc. (“Slocum”) to build a new home for them for $1,850,000.  Under the contract, the project was to be completed in no more than 52 weeks after excavation work started.  Substantial completion was actually about one and a half years late.  The Beckers sued Slocum in the Law Division of the Superior Court of New Jersey over the delay and alleged construction defects including water penetration and deterioration of the outdoor decking, siding, and finishing.

The contract, which contained a clause requiring arbitration of disputes, stated:

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American, Bills, Business, Cheque
In the case of Secretary of United States Department of Labor vs. Bristol Excavating, Inc., the United States Court of Appeals for the Third Circuit, recently issued an important, precedential opinion on when payments by third-parties need to be included by employers in the calculation of their employees’ overtime pay rates.

Bristol Excavating, Inc. (Bristol) is a small excavation contractor.  Bristol was a subcontract for Talisman Energy, Inc., a large producer of natural gas.  Bristol provided Talisman with equipment, labor and services at Talisman’s drilling sites.  Bristol’s employees often worked more than 40 hours per week, and Bristol paid them “overtime,” or one and a half times the regular hourly rate which Bristol normally paid them (“time and a half”) for all the hours they worked over 40 hours in one week.

Talisman offered workers at its sites – not just its own employees – separate bonuses rewarding them for safety, efficiency and productively measured by completion of work.  Bristol’s employees asked Bristol if they could participate.  Bristol agreed, and also agreed to do the administrative work.  This administrative work included paying the bonuses through Bristol’s payroll, and taking out all applicable tax withholdings.  Bristol did not include these bonuses in its calculation for overtime pay for its employees because it was not Bristol’s money with which the employees were being paid.

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Both New Jersey’s tenure laws in Title 18A, which govern employees in New Jersey’s public schools, and the New Jersey Civil Service Act in Title 11A and Civil Service regulations are designed to ensure that government employment decisions, such as hiring, firing, promotion, etc., are made based on merit rather than nepotism, cronyism, racism, sexism, favoritism or politics.  Of course, these factors still come into play, and employers seek ways around these laws.  The New Jersey Supreme Court recently rejected such an attempt by the Newark School District to terminate a tenured secretary.

Brenda Miller was an employee of the Newark School District, which had been taken over and operated by the State of New Jersey.  The District had adopted the Civil Service Act, Title 11A of New Jersey Statutes, to govern its employees.  As public school employees, however, their employment was also governed by Title 18A, which governs New Jersey’s public grammar schools, middle schools, high schools and state colleges.

Brenda was hired in 1998 and held clerical and secretarial positions through 2012.  By virtue of this service she had acquired tenure under Title 18A.  These positions were also governed by the Civil Service System, and were considered “classified” titles.  In 2012, however, the District reclassified Brenda’s current position to an “unclassified” confidential assistant, which as an unclassified title did not have the same civil service protections as classified positions – indeed, unclassified positions have little more protection than an employment at will job in the private sector.  In 2014, citing the unclassified status of Brenda’s title, the District terminated her.  It did not provide her with notice or a hearing.

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Refugees, Economic Migrants

Governor Murphy signed New Jersey’s Equal Pay Act into law in 2018.  The NJEPA  takes a necessary step in making pay discrepancies in the workplace more transparent with the hopes that this will address the pay differential between white men minorities, and women.  Essentially, it bars any penalty to any employee for requesting or disclosing information regarding any employee’s job title, rate of compensation, benefits, race, gender, ethnicity, or other protected characteristic when the purpose of the inquiry or disclosure to investigate the possibility of discriminatory treatment.  (While the NJEPA was originally intended to address inequitable pay for women, it was expanded to cover all protected classes of people.)

This allows for employees to obtain information which previously (and even now) is largely safeguarded by employers as “private” in order to determine whether they are being discriminated against based upon a protected classification.   Any employer “policy” which forbids discussing compensation in the workplace could be considered void by the law.

The NJEPA amended New Jersey’s Laws Against Discrimination to enable the use of the protections of that statute. The NJEPA also specifically makes it unlawful to pay employees in protected classes a different rate of compensation when performing substantially similar work considering skill, effort, and responsibilities. Differentials may still exist when based on seniority, merit, education, productivity, experience, and other legitimate business reasons. The Act also allows expands upon the LAD’s typical 2-year statute of limitations by setting forth that limitation period restarts each time the employee receives unequal compensation resulting from a discriminatory decision or practice.  The employee may also recover up to 6 years of back pay as a result of a violation by the employer.  Additionally, the employee may receive treble damages – meaning that they may recover three times the monetary damages awarded as a result of the pay discrepancy.

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One of the most difficult questions in New Jersey Business law concerning the retirement of a business owner is determining the value of the laptop-3175111__340-300x200owner’s share of the business which the remaining owners must pay to buy out his share.  This can be difficult even if the departure itself is on good terms.  The method and amount of the valuation can cause vicious disputes even among friendly partners.  The Chancery Division of the Superior Court of New Jersey in Bergen County recently issued a published decision on this problem in the context of a limited liability company.

Background

In that case, Namerow v. Pediatricare Associates, LLC, four pediatricians were members (owners) of a medical practice named Pediatricare Associates, LLC.  The Amended Operating Agreement which governed valuation of the business upon member retirements provided that:

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justitia-3222265__340-300x190Injunctive Relief

Injunctive relief is an order by a court requiring a party to cease an act, condition or behavior.  It is a powerful tool in New Jersey business law civil cases. An order for injunctive relief is typically referred to as an “injunction.”  A temporary injunction is granted only after a hearing, and a permanent injunction is granted after the case has been completed.  A temporary restraining order may be granted prior to a hearing in emergency situations.

Where to File

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Types of Contract Damages

In New Jersey business law disputes, there are two broad categories of damages, legal damages and equitable damages.

Briefly, legal damages, or remedies in law, are money damages.  Legal damages are for harms which can be compensated by the payment of money by the party which breached the contract.  In New Jersey contract law, punitive damages are not allowed.  Likewise, attorneys fees cannot be recovered unless the contract provider for it.  Compensatory damages, which are the amount of money needed to make the innocent party whole, may be awarded when they can be proved.  In business disputes these are often lost profits, but may also include other damages such as diminution of value of property.

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Decision on Objections to Fraud and Criminal Activity of Whistleblowers by New Jersey Supreme Court

In the recent case of Chiofalo v. State, Division of State Police, the Supreme Court of New Jersey issued an important employment law decision dealing with whistleblower retaliation.

The Conscientious Employee Protection Act — New Jersey’s “Whistleblower” Law

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money-2724241__340-300x203If a person wants to control the distribution of funds held in an IRA after their death, it is possible to do so by naming a trust as the beneficiary of the IRA.  However, in order to minimize tax consequences, the trust named as the beneficiary must be a “look-through” trust which qualifies for payout of the IRA funds over time rather than as a lump sum upon the death of the IRA owner.

While IRAs and qualified retirement plans generally do not require probate, distribution of these assets are controlled by contract law and are distributed pursuant to the beneficiary’s “designations” which were filed with the financial institution prior to the account owner’s death.   A trust can be named as the beneficiary.   However, the structure of the trust will determine whether the proceeds must be paid in a lump sum, and thus subject to potentially significantly higher income tax, or if the Trust qualifies as a “look through” trust in which the payout of the proceeds can be stretched-out over the life expectancy of the oldest beneficiary of the Trust.

You might wonder why the owner of an IRA would want to name a trust as his or her beneficiary, particularly when it is much simpler to merely name the individuals as the beneficiaries.  The primary reason is to control the distributions to the beneficiaries after death. You do not avoid paying taxes by naming a trust.  However, you can prevent your beneficiaries from taking lump sum distributions of your IRA, which would likely result in additional taxes and the remaining balance of which could be squandered by your beneficiaries.  But the purpose of a naming a Trust as the Beneficiary of an IRA is not tax savings.   In fact, it’s quite possible to pay more in taxes even if trust is designed properly. Therefore, you would only use trusts for personal (non-tax) reasons.