On January 14, 2015, the New Jersey Supreme Court issued an opinion (Hargrove v. Sleepy's, LLC, No. A-70-12), defining the criteria for independent contractor status.  The Court adopted the worker-friendly "ABC" test to determine whether an individual is an employee or an independent contractor under New Jersey's Wage Payment Law ("WPL") and New Jersey's Wage and Hour Law ("WHL"). The Court declined to adopt the "economic realities" test used to determine employee status under the federal Fair Labor Standards Act ("FLSA").

 

The issue came before the Court via a certified question from the Third Circuit seeking guidance regarding what test the state would apply to determine employee/independent contractor status for WPL and WHL purposes.  The Supreme Court stated, very clearly, that the "ABC" test, derived from the New Jersey Unemployment Compensation Act, would apply. 

 

The "ABC" Test

 

Although similar in some respects to the federal test, the "ABC" test is a harder standard for employers to meet.  The "ABC" test presumes that an individual is an employee unless an employer can satisfy all three of the following criteria:

1. Freedom from control or direction in the performance of services, both in contract and in fact;
2. The services are outside the usual course of the business or performed outside all the offices of the enterprise; and
3. The individual is customarily engaged in an independently established trade, occupation, profession or business.