Articles Tagged with New Jersey employee misclassification

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Independent Contractors versus Employees Under New Jersey Employment Law

Under New Jersey employment law, the classification of a worker as an employee or independent contractor has significant ramifications for both the employer and employee, including the ability of the employer to shift the cost of insurance, payroll taxes and benefits to the employee, and relieving it from having to pay time and a half for overtime.  The New Jersey Supreme Court explained in the seminal case ofbuilding-home-construction-contractor-blueprint-architecture-300x200 Hargrove vs. Speepy’s LLC, that there are different, fact sensitive tests for this determination depending on the context, such as for wage issues, workers compensation and unemployment.  More recently, the Supreme Court addressed this issue in the context of whether an employer must make contributions for disability and unemployment in the case of East Bay Drywall, LLC vs. New Jersey Department of Labor and Workforce Development.

Background: East Bay’s Business Model

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New Jersey employment law governs the classification of workers as employees or independent contractors.  The classification is important and fact sensitive.  It has far reaching consequences.  The Appellate Division recently issued a published opinion in imagesCAWQ89PSthe case of East Bay Drywall, LLC vs. the Department of Labor and Workforce Development, which examined some of these issues and provides guidance for both employers and employees.


The Department of Labor and Workforce Development administers the New Jersey Unemployment Compensation and Temporary Disability Insurance Laws. It collects revenues from employers and employees to fund these benefits.  However, “employers” only need to make contributions for their “employees,” not for independent contractors.  Therefore, there is an economic incentive for businesses to classify workers as contractors rather than employees.  However, misclassification can trigger severe consequences.

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