Employment Law Blog

1099 vs. W2

March 25, 2019

The New Jersey Department of Labor and the New Jersey Division of Consumer Affairs have reminded employers that under N.J.S.A. 43:21-1 et seq., the New Jersey Unemployment Compensation Law (NJUCL), if a service is performed for remuneration or under any contract of hire, written or oral, express or implied, it is considered to be covered employment, unless the potential employer is able to establish the following with regard to the service at issue and the individual providing that service:

(A) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and
(B) Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
(C) Such individual is customarily engaged in an independently established trade, occupation, profession or business.

N.J.S.A. 43:21-19(i)(6).

This statutory criteria, commonly referred to as the "ABC test", is written in the conjunctive. Therefore, where a putative employer fails to meet any one of the three criteria listed above with regard to an individual who has performed a service for remuneration, that individual is considered to be an employee and the service performed is considered to be employment subject to the requirements of the NJUCL; in particular, subject to N.J.S.A. 43:21-7, which requires an employer to make contributions to the unemployment compensation fund and the State disability benefits fund with respect to its employees.

In the event that the State determines an “Independent Contractor” is really an employee, the employer will be responsible for payroll taxes and unemployment contributions for the misclassified employee. If the employer maintains any benefit plans such as 401(K) or medical, the misclassified employee may have retroactive claims for benefits.

If you are contacted by the New Jersey Department of Labor or the United States Department of Labor, the attorneys at Mandelbaum Salsburg are happy to be of assistance and have extensive experience in dealing with these examinations.

Attorney: Martin Hauptman
Related Practice: Labor and Employment
Category: Employee Benefits