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 the 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.