Modern employers are constantly on the lookout for ways to cut costs and improve the return on their investments. Labor costs are a major issue for many companies and employers want the biggest bang for their buck. Increasingly, employers have turned to independent contractors or temporary workers to reduce costs. Many new businesses driven by the internet have business models that involve few if any employees to get the work done.
Welcome to the Gig Economy. “Gig” is musicians’ slang for a date or engagement, reports NPR. The 1950’s may have been the golden era of the “real job,” one that you could probably keep for as long as you wanted, you were fairly paid, and the job came with benefits like a pension and health insurance. Many workers were in unions and collective bargaining agreements included job protections.
That’s not the world most of us live in now. We may be in the process of the next industrial revolution. The future is forecast as one where careers are a patchwork of temporary projects and assignments, with the help of apps and websites like FancyHands, Upwork, and Guru. While the number of people freelancing full-time is relatively small, their numbers are rapidly increasing, according to CNN Money. In this new world order, work is not performed by employees, it’s done by independent contractors.
This model has many advantages for employers. Because work is done by independent contractors, not employees, companies do not pay for workers compensation or unemployment insurance. They need not pay Social Security taxes, benefits, the minimum wage, or overtime. Laws that protect employees from workplace discrimination and retaliation are harder to apply to independent contractors, although it can be done on the right facts.
Some employers contract with placement firms to avoid classifying workers as employees of the location where the workers are placed. That system avoids issues about hiring and firing, since the worker is never hired or fired by the place the worker actually performs work. The customer of the placement firm simply tells the placement firm whether to have the worker report – or not.
If you have taken a job and are performing work for another person or business you may have been told the work is a freelance position, that you’re an independent contractor, and you may have signed a contract that spells out this is your status. Depending on your work situation, that may not be true and the contract you signed may not be valid. You may be missing out on wages, overtime payments, payment for medical bills, coverage for discrimination, retaliation, or work-related injuries, and unemployment benefits — all because the entity providing you work misclassified you as an independent contractor.
Many state and federal laws cover employment and there are many definitions of who is an employee. How can you tell if you’re an employee or not? Last year the New Jersey Supreme Court spelled out the test state court judges should use when deciding if a worker is an employee under the state’s Wage Payment Law (which covers when and how employees should be paid) or its Wage and Hour Law (which covers the minimum wage and overtime). It selected the “ABC test” (as spelled out in N.J.S.A. 43:21-19(i)(6)).
The “ABC test” presumes the worker is an employee unless the company can provide evidence showing:
- Such individual has been and will continue to be free from control or direction over the performance of such service, both under his or her contract of service and in fact,
- 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
- Such individual is customarily engaged in an independently established trade, occupation, profession or business.
The worker is considered an employee if the employer fails to carry its burden in any of these three issues. The Court also stated for each section:
- The employer must show it didn’t exercise control over the worker and it wasn’t able to exercise control in terms of the completion of the work. It’s not necessary the employer control every aspect of the worker’s trade. Some level of control may be enough to show the worker is an employee. Facts that are important when determining the degree of control include if the worker must work set hours or jobs, whether the company has the right to control the details and means of the work and whether the services must be performed by the worker or if that person can arrange for it to be done by someone else.
- The employer needs to show the services provided by the worker were either outside the normal course of its business or the work was done outside all the places of business of the enterprise (locations of its physical plant or where it conducts an integral part of its business).
- The employer must show it exists and will continue to exist apart from the relationship with the worker. The employer must be stable and lasting, surviving when the worker leaves, and the individual’s profession will persist despite the end of the relationship with the company. If the worker depends on the employer and will be unemployed when the relationship ends, he or she is an employee.
Decisions in this area are subjective and sometimes difficult to make. The variations of people’s jobs and work circumstances result in general rules that must be applied to individual cases.
If you believe you’ve been misclassified as an independent contractor and suffered a wage or other loss as a result, contact our office so we can discuss your situation, advise you how the laws may help you, and provide you with best options to recover money damages if they are due.