Labor & Employment Insights

Classifying workers as independent contractors can result in significant cost savings for employers, who are relieved of the obligation to offer company sponsored employee benefits (paid time off, health insurance contributions, etc.), to pay into state-sponsored employee benefit programs (e.g., paid sick leave, temporary disability, unemployment), and comply with other employment laws.  However, a recent decision from the New Jersey Superior Court, Appellate Division, illustrates that employers who misclassify workers as independent contractors rather than employees – thereby depriving them of the benefits of employee status – learn a tough lesson when workers challenge their employment status.

The Court Proceedings:

In Rodriguez v. De LaRosa (App. Div. 12/11/23), Barber shop owner Reynaldo De La Rosa hired Jonathan Rodriquez and other immigrants from the Dominican Republic to work six days a week as independent contractor barbers and to reside in housing he owned.  Rodriguez ultimately filed suit against De LaRosa in the Special Civil Part (a court with a jurisdictional cap on damages of $15,000) claiming he should have been classified as an employee and as required by New Jersey’s Wage and Hour Law, paid overtime for all hours in excess of 40 hours in the preceding two-year period.  After a four-day trial, the lower court agreed that Rodriguez did not meet the requirements for classification as an independent contractor under the “ABC test” used to determine independent contractor status and awarded him $15,000 in unpaid overtime wages.

Effective March 11, 2024, the U. S. Department of Labor (DOL) will implement its final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, rescinding the 2021 Trump era Independent Contractor Rule that made it easier for employers to establish independent contractor status.  The final rule substantially mirrors the Department’s proposed rule issued in October 2022.

Reaffirmation of the Economic Realities Test:

As noted in the DOL’s accompanying FAQ found here, the final rule “continues to affirm that a worker is not an independent contractor if they are, as matter of economic reality, economically dependent on an employer for work.”  The final rule reverts back to the narrower “totality of the circumstances” economic reality test in effect prior to 2021 that applied the following six non-exhaustive factors to analyze employee or independent contractor status:

In a December 11, 2021 press release, New Jersey Attorney General Matthew Plotkin and New Jersey Department of Labor Commissioner Robert Asaro-Angelo announced the filing of the first lawsuit under a 2021 law that enhances the State’s authority to curtail illegal misclassification of workers as independent contractors through actions such as direct suits in the Superior Court, work-stoppage orders and enhanced penalties.

“When employers unlawfully and callously toss their workers into the ‘independent contractor’ category they are not only depriving them of a steady paycheck, they are also stripping them of earned sick leave, workers compensation, minimum wage, and more,” said AG Plotkin.  “These are national, profitable corporations with deep pockets who are padding their profits with illegal labor schemes, and they seem to have no plans to stop this kind of behavior.”  Labor Commissioner Asaro-Angelo cautioned that companies profiting through misclassification “have been put on notice.  We are proud to have the strongest worker protection laws in the country, which also safeguard employers who play by the rules.  Misclassifying employees will not be profitable, nor overlooked.”

Under New Jersey law, workers are presumed to be employees unless the employer can establish the three criteria of what is commonly called the “ACBC test”: 1) the worker is largely free from the control or direction of the company over the performance of the work; 2) the type of work being performed by the worker is outside the company’s usual course of business, or is performed outside the company’s place of business; and 3) the worker has their own independent trade, job, profession or business.  Treating workers who do not meet these stringent criteria deprives them of the rights and benefits afforded to employees, including minimum wage, overtime, workers compensation benefits, temporary disability benefits, earned sick leave, job protected family leave, equal pay, unemployment payments, and statutory protection against unlawful discrimination.

In a retrenchment of the #MeToo movement’s maxim that “all women must be believed,” a federal jury in Philadelphia found that a University engaged in anti-male bias when it investigated female resident’s sexual assault claim and awarded the accused male employee a whopping $15 million dollars in damages.

The Facts:

The plaintiff, Dr. John Abraham, was the Director of the Musculoskeletal Oncology Center at Thomas Jefferson University Hospital, a professor at Thomas Jefferson University and a partner in the Rothman Orthopedic Institute.  After a pool party hosted by Dr. Abraham at his home, he engaged in sexual activity with a subordinate female resident physician.  Dr. Abraham claims he then filed a report with the University that the resident had intoxicated him and aggressively pursued sex without Dr. Abraham’s consent.  Dr. Abraham maintains that this complaint was not acted upon.  Thereafter, the female resident filed a report with the University alleging she was raped by Dr. Abraham.

On August 30^th, the U.S. Department of Labor (DOL) issued a long-awaited proposed rule that if adopted, will substantially expand the ranks of workers eligible for overtime payments for work in excess of 40 hours, as required by the Fair Labor Standards Act (FLSA).

Under present FLSA regulations, certain “white collar” workers who meet minimum salary requirements and perform specified duties may be classified as “exempt” employees ineligible for overtime.  The current salary threshold to qualify for the white collar exemptions is $35,560 annually, and $107,432 for the “highly compensated employee” exemption.  The proposed rule would increase that minimum salary threshold to $55,068 per annum, and $149,988 for highly compensated employees.

How Businesses Will Be Affected

The National Labor Relations Board (“NLRB” or “Board”) is responsible for enforcement of employee rights under Section 7 of the National Labor Relations Act (NLRA) to engage in protected concerted activity, such as organizing unions, discussing wages and discipline, and other terms and conditions of employment.

Many employers are not mindful of the fact that these rights extend to both unionized and non-union workplaces.  With the decline in union membership, the NLRB has increasingly turned its focus away from unionization issues to workplace practices that may run afoul of employee rights under the NLRA, as illustrated by two recent decisions from the Board.

The Landmark Stericyle Decision’s Impact On Employee Handbooks and Other Workplace Rules

Under New Jersey’s Unemployment Compensation Law, employers have long been obligated to provide separating employees with a Form BC-10 which includes instructions for claiming unemployment benefits, and to provide a reason for the employee’s termination when requested by the NJ Division of Unemployment and Temporary Disability Insurance (the “Division”).  Because employers historically ignored or were ignorant of these requirements, the State Legislature amended the Unemployment Compensation Law to include additional reporting requirements and enhanced penalties for those who continue to ignore these obligations.  These changes went into effect on July 31, 2023.

The Employer’s Reporting Obligations

Regardless of the reason for the employee’s separation, immediately upon a separation of employment the employer must:

Mandatory Sexual Harassment Policy Requirements

Since October 2018 New York has mandated employers to adopt written sexual harassment policies and provide yearly sexual harassment training.  The State developed a Sexual Harassment Model Policy and model harassment training materials that employers can use, or employers can develop their own policy and training materials so long as they meet the State’s minimum standards for compliance.

In April 2023 the New York Department of Labor updated its Sexual Harassment Model Policy (the “Model Policy”), model harassment complaint form, and model training materials, which can be found here.  The updated Model Policy