Appellate Division Rules Independent Contractor Agreements Signed by Driver’s Corporation Not Bullet Proof Against Class Action Overtime and Wage Deduction Claims 

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From JDSupra, Patrick McGovern discusses a New Jersey case in which an appellate court allowed a misclassification claim to proceed even though the company signed an independent contractor agreement with separate corporations. Patrick writes:

The Appellate Division held that “a court is not limited to the terms of the contract between the parties” and the court should review “the substance, not the form of the relationship … to determine if [the relationship] is exempt from the WPL and WHL.”

The A-B-C test presumes that a service provider is an employee, unless the service recipient can prove A, B and C: (A) the service provider is free from direction or control by the service recipient, (B) the services rendered to the recipient are outside the recipient’s usual course of business, or are performed outside all places of the recipient’s business, and (C) the service provider is customarily engaged in an independently established trade, occupation, profession, or business.

Interglobo argued that the A-B-C test did not apply because Veras’s employer was his own corporation, J&K Trucking Solution, and under the economic realities test, Interglobo was not the employer. The court rejected this argument, too, and held that the economic realities test does not apply to WHL and WPL claims.

The Appellate Division held that the A-B-C test applied to Veras regardless of whether the CLA was signed by Veras as an individual or by his corporation, and stated that the A-B-C test presumes that Veras was an employee, not an independent contractor. The Appellate Division reasoned that even if the economic realities test did apply, dismissal of the complaint at the motion to dismiss stage was not warranted solely because of the CLA, because this test is fact-intensive, and courts rarely decide a worker’s status on a summary judgment motion, let alone on a motion to dismiss before discovery is taken.

Ultimately, this Appellate Division panel decided that the mere fact that the service provider’s corporation, and not the driver himself, signed an independent contractor agreement with the service recipient was not dispositive of the issue of employee versus independent contractor status at the motion to dismiss stage, and the underlying facts must be examined to determine whether, despite the contract, the service provider is an employee and has standing to sue the service recipient under the WHL or the WPL.  As businesses attempt to create more separateness between themselves and their service providers, this court cautions that employee status will not depend on the existence of a contract alone, but will be analyzed under the rigorous A-B-C test.

Read the full story at Appellate Division Rules Independent Contractor Agreements Signed by Driver’s Corporation Not Bullet Proof Against Class Action Overtime and Wage Deduction Claims | Genova Burns LLC – JDSupra

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