New Jersey Wage Deduction Class Action Revived By Appellate Division: More Independent Contractor Fallout

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Fox Rothschild LLPWhen employers classify individuals as independent contractors, they are not obligated to provide them with certain benefits, as they would statutory employees.  Sometimes, if those individuals are found to not be independent contractors, those “failures” come back oftentimes to haunt the employers.  Another example of this phenomenon has happened in that a New Jersey appellate court has reversed a lower court that found that an employer properly deducted monies from truck driver compensation to pay for workers compensation insurance (as well as other things).  The case is entitled Morales et. al. v. V.M. Trucking LLC and issued from the New Jersey Appellate Division.

The Court found that the “defendants do not cite to any legal authority allowing an employer to shift its legal obligation to provide workers’ compensation insurance to its employees through the guise of requiring the employees to pay the costs of the insurance, and we find nothing in the [Wage and Payment Law] authorizing a wage deduction for that purpose.”  Thus, the Court concluded that the deductions were illegal because the drivers were really employees under the NJ Wage Payment Act because the drivers did not meet the (stringent) ABC test under the NJ Unemployment Law.

The lower court found the deductions were allowable under certain provisions of the agreements that the men signed.  The appellate Court disagreed, finding that the “record here is devoid of any evidence establishing that the insurance for which deductions were made from plaintiffs’ wages was part of an employee insurance plan.”  The Court remanded the case back to the trial court to make additional findings regarding the deductions and whether a class of such workers should be certified.

The Takeaway

Calling people independent contractors allows employers to do things that they might not be able to do vis-à-vis their own employees.  From many cases that I have handled, I know that the New Jersey Wage Payment Act is enforced in a very strict manner, in favor of employees.  The lesson here is that simply having an “agreement” that denominates people as independent contractors is not the end of the game, by any means.

There still remains the ABC test to be overcome…

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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