In New Jersey, the provisions for determining whether someone is an independent contractor versus an employee under the Workers’ Compensation Act (N.J.S.A. 34:15-36) are critical, as independent contractors are excluded from coverage under the Act. The determination hinges on two primary tests: the control test and the relative nature of the work test, which are applied to distinguish between independent enterprises and integral parts of an employer’s business.
Independent Contractors
- Definition: An independent contractor is someone who operates an independent business, performs work according to their own methods, and is not subject to the employer’s control over the means of accomplishing the work, only the result (N.J.S.A. 34:15-36)
- Exclusion from Workers’ Compensation: Independent contractors are not considered “employees” and are therefore not covered under the Workers’ Compensation Act.
- Test for Determination:
- Control Test: Evaluates the degree of control the employer has over the worker. Four factors are considered:
- Degree of control the employer has the right to exercise.
- Method of payment )e.g. by job, hourly or salary).
- Who furnishes equipment.
- Right of termination
- Relative Nature of the Work Test: Assesses whether the work is an integral part of the employer’s regular business or a separate enterprise. Courts emphasize substance over form, meaning contractual labels (e.g., calling someone an “independent contractor”) do do not determine status. Instead, the actual relationship is what’s important.
- Control Test: Evaluates the degree of control the employer has over the worker. Four factors are considered:
Temp Agencies or Leasing Companies
When Workers are supplied through temporary agencies, professional employment organizations, or leasing companies, New Jersey Courts apply the special employee doctrine to determine if the workers is an employee of the company to which they are lent. The following five criteria are considered, though courts may also evaluate other relevant factors.
- Contract of Hire: Whether there is an express or implied contract of hire with the special employer
- Nature of Work: Whether the work performed is that of the special employer.
- Control: Whether the special employer has the right to control the details of the work.
- Payment of Wages: Whether the special employer pays wages directly to the worker or to the leasing agency.
- Hiring and Firing Power: Whether the special employer has the power to hire or fire the worker.
A worker is deemed a “special employer” of the borrowing company they may be covered under that company’s workers’ compensation insurance, even if supplied by a third-party agency. Another factor to consider is whether the third-party agency has its own workers’ compensation insurance. The Workers’ Compensation Act is liberally applied and the court will always lien towards finding insurance to cover the injured worker.
Owner/Operator of Trucks or Other Vehicles
- Agreement Terms: Courts examine the agreement between the owner/operator and the alleged employee. Contractual terms labeling the worker as an independent contractor are not determinative.
- Control: The extent of control (or right to control) the employer has over the driver’s activities. For example:
- Leasing the truck to the employer or using an employer-owned truck increases the likelihood of an employment relationship.
- Exclusive hauling agreements creating economic dependence on the employer lean towards employment.
- Responsibilities like loading and unloading goods for the employer suggest greater integration into the employer’s business.
- Economic Dependence: If the owner/operator is economically dependent on the employer (e.g., exclusive contracts), courts are more likely to find an employment relationship.
Control and integration into the employer’s business is emphasize, regardless of contractual labels. The more control the employer exercises (e.g., dictating routes, schedules, the more likely the owner/operator will be deemed an employee rather than an independent contractor
Summary
- General Independent Contractors: Excluded from workers’ compensation under N.J.S.A. 34:15-36, with status determined by the control test and relative nature of the work test.
- Professional Employment Organizations/Temporary Service Companies: The special employee doctrine applies, using five criteria to assess whether a lent worker is an employee of the borrowing company.
- Owner/Operators of Trucks/Vehicles: The control and relative nature of the work test are applied, with specific focus on the agreement, control (e.g., truck ownership, exclusivity), and economic dependence.
Hiring an Attorney Early can Avoid a Claims Denial
All too often employees are labeled independent contractors and are not provided the workers’ compensation benefits they are entitled to. An attorney will ensure you report all injuries correctly and are properly classified. They will expertly navigate the complexities of the workers’ compensation process for you.
Contact the New Jersey Workers’ Compensation Lawyers at the Law Offices of Michael S. Williams
If injured at the workplace contact a Workers’ Compensation lawyer at the Law Offices of Michael S. Williams. Call 732-351-2800 or reach out online to book a free consultation. Our offices are in Tinton Falls and New Brunswick, New Jersey. We serve clients in Monmouth and Middlesex Counties and throughout the state.
