Employers play a lot of games in order to avoid paying overtime wages. One of the more recent and “trendy” schemes used by employers in order to avoid paying workers the overtime to which they are otherwise entitled under the law, is to tell those workers that they are “independent contractors.” Your employer may tell you that you must be paid on a 1099 basis, even if you used to be paid on a W-2 basis. Your employer may even make you sign a “contract” in which you “agree” that you are an independent contractor. The contract might even state that you understand that you are not entitled to overtime. The mere fact, however, that an employer issues a 1099 to you instead of a W-2 and calls you an independent contractor instead of an employee, does not decide, legally, the issue.
In New Jersey, it is not the label that your employer places upon you, or the choice that the employer makes, with or without your consent, on how to report your income to the IRS that determines whether or not you are correctly or appropriately considered an independent contractor. Instead, in New Jersey, we look to the reality of your relationship to your employer to decide whether or not you are an employee or an independent contractor and, from there, to determine whether or not you are entitled to receive time and a half for the hours that you work over 40 in a week.
How do we decide if you are truly and correctly an independent contractor? First answer this question: Were you hired to do work for pay? If you were, than you are presumed, under New Jersey Law, to be an employee. Once you have been deemed an employee, your employer then must prove that you are, in fact, an independent contractor. The employer can only prove this by establishing all three of the following factors: First, that you perform your work independent of any control or supervision by the employer and that the employer doesn’t have any right, whether exercised or not, to control or supervise the performance of your job; second, the employer has to prove that the work that you do for the employer is either completely “outside” the “usual business” that the employer performs or that all of the work that you perform is outside of every place of business of the company for which you are performing the work; and third, the employer has to prove that you are operating your own independently established business, meaning that you essentially have your own company, that you have formed separate and apart from your relationship with this employer in order to be in business for yourself and that you can exist independently and separate and apart from the job that you do for this particular employer. If the employer can’t prove all three of those things, then you, according to New Jersey Law, are not an independent contractor, which means that you are entitled to be treated as an employee in terms of receiving overtime for hours that you work more than 40 in a week, receiving the minimum wage for the work that you perform, and having appropriate payroll deductions made from your pay, such as contributions to Social Security, Taxes payable to the State and Federal Government, Unemployment Taxes, Disability Tax, and alike.
If your employer has required you to accept payment on a 1099 basis or otherwise told you that you are an “independent contractor” and you believe that this is incorrect, you may be entitled to damages for any unpaid minimum wages or unpaid overtime that you should otherwise have earned. This was recently addressed and affirmed by the New Jersey Supreme Court, which for the first time, ruled that workers in New Jersey cannot be deemed independent contractors unless the factors that I discussed are all present in the reality of your work situation. The ruling came in a decision known as the Sleepys decision and is a victory for New Jersey’s working people. Learn your rights and do not allow your employer to fool you or to trick you into thinking that you are not an employee.