Determining whether a person is operating as an employee or an independent contractor is significant for many reasons, including taxation purposes, coverage under key employment statutes such as Workers’ Compensation Act, Law Against Discrimination, and Unemployment Compensation Law, tortious liability, and in determining the duties owed to each other in the employment relationship.
There is no statutory definition provided in New Jersey law for an independent contractor. Instead, New Jersey courts are left to determine whether one’s employment relationship is that of an independent contractor or an employee. One of the most important considerations is whether the employer has the right to control the worker and what is the scope of “control”. In N.J. Prop.-Liab. Ins. Guar. Ass’n v. State, 195 N.J. Super. 4, 8-10 (App. Div. 1984), the Appellate Division distinguished the difference between the levels of control in the context of an employee/servant and an independent contractor. The Appellate Division found that the “control test” can be used to determine whether the employer has to right to direct not only what is to be done, but also how it is accomplished. An independent contractor is able to determine, on his or her own, the way he accomplishes a task. Generally, the only control an employer has over an independent contractor is the end result of the work done.
“Control”, however, is not the only factor as courts have considered the totality of the circumstances. In Pukowsky v. Caruso, another Appellate Division case, the court considered twelve (12) factors:
(1) the employer’s right to control the means and manner of the worker’s performance;
(2) the kind of occupation-supervised or unsupervised;
(4) who furnishes the equipment and workplace;
(5) the length of time in which the individual has worked;
(6) the method of payment;
(7) the manner of termination of the work relationship;
(8) whether there is annual leave;
(9) whether the work is an integral part of the business of the ‘employer’;
(10) whether the worker accrues retirement benefits;
(11) whether the ‘employer’ pays social security taxes; and
(12) the intention of the parties.
Pukowsky, 312 N.J. Super. at 182. -Based on the Pukowsky case, there is clearly more for the court to consider than simply the level of control an employer has over a worker. This means that many cases involving a dispute as to whether a worker is an employee or independent contractor are highly fact sensitive. Nevertheless, the scope of control is the leading consideration of the court. Answering the question of whether a worker is an employee or an independent contractor can have important consequences. On the one hand, employees enjoy certain benefits and protections not afforded to independent contractors. On the other hand, independent contractors enjoy more freedom in their work. In order to ascertain your rights in the employment context, it is always important to first know whether you are an employee or independent contractor.