Employee or Independent Contractor?

New Jersey’s Independent Contractor Rule

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From Construction Law Musings – Richmond, VA — 

A Principal Is Generally Not Culpable For The Wrongful Conduct Of Its Independent Contractors.

It is well settled law in New Jersey that one who hires independent contractors is not liable for the wrongful conduct of those contractors in the performance of their duties and services. Bahrle v. Exxon Corp., 145 N.J. 144, 156 (1996); Baldasarre v. Butler, 132 N.J. 278, 291 (1993). The public policy reason for this rule is that unlike an employee, an independent contractor controls the manner in which the work is to be done, and therefore should be the one charged with the damages that result from its acts. Id.; Mavrikidis v. Petullo, 153 N.J. 117, 132 (1998); Wilson v. Kelleher Motor Freight Lines, Inc., 12 N.J. 261, 264 (1953). Respondeat superior does not apply to the actions of independent contractors because they are non-employee agents. See, e.g., JMB Enterprises v. Atlantic Employers Insurance Co., 228 N.J. Super. 610, 617-18 (App. Div. 1988). The key question is whether the relationship to the owner/developer is characterized by their “self-determination in both an economic and professional sense” and, accordingly, not a master and servant relationship, even though they are principal and agent. Mavrikidis, 153 N.J. at 134.

To avoid the imposition of the wrongful conduct of a general contractor and/or subcontractors, an owner/developer must be able to show, from the fact record, that the contractor parties’ actions were conducted in their capacities as independent contractors.

Exceptions to the Rule of Non-Liability of a Principal for the Alleged Wrongful Conduct of Its Independent Contractors.

There are three exceptions to the rule that a principal/contractee is not liable for the wrongful conduct of its independent contractors: (1) when the principal retains control over the manner and means of doing the work the contractor provided; (2) when the principal has engaged an incompetent contractor; or (3) where the services provided by the contractor are a nuisance per se (i.e., “inherently dangerous”). Majestic Realty Associates, Inc. v. Toti Contracting Co.; 30 N.J. 425 (1959); Mavrikidis, 153 N.J. at 133.

The first exception bespeaks of control, but this is limited to how the work is to be conducted by the contractors/subcontractors. One engaging an independent contractor may properly exercise the general control necessary to create the terms of a contract and monitor compliance, but such conduct does not, in and of itself, equate with control over the means and manner of job performance. See Muhammed v. New Jersey Transit, 176 N.J. 185, 197 (2003); Mavrikidis, 153 N.J. at 135; Majestic, 30 N.J. at 431; AT&T v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1435 (3d Cir. 1994), cert. denied, 514 U.S. 1103 (1995); Marion v. Public Serv. Ele. & Gas Co., 72 N.J. Super. 146, 154-55 (App. Div. 1962). Consequently, in order to impose liability on an owner/developer, it must be shown that such party exercised active participation in the manner of the work. Muhammed v. New Jersey Transit, 176 N.J. at 197.

For the second exception, it must be shown that the owner/contractor was negligent in its decision to retain the general contractor/subcontractors. Knowledge of incompetence may be difficult to prove. See Mavrikidis, 153 N.J. 117. However, retaining a general contractor or approving subcontractors not licensed or registered by the State, or who have publicly-disclosed fines/penalties, may be sufficient to impose such knowledge. Otherwise, “no presumption as to the negligence of an employer in hiring an independent contractor arises from the fact that, after being hired, the contractor is negligent in the performance of his duties and injures the person or property of another.” Id. at 136.

The third exception is nuisance per se a/k/a “inherently dangerous.” Mavrikidis, 153 N.J. at 143. Sections 413, 416, and 427 of the RESTATEMENT (SECOND) OF TORTS (1965) defines “inherently dangerous” work as work that involves “a peculiar risk of harm” because it involves activities that require “special skill and care” for which there is a “grave risk of danger” if negligently done. Majestic, 30 N.J. at 435…

Read the full story at New Jersey’s Independent Contractor Rule 

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