E. Bay Drywall, LLC v. Dep't of Labor & Workforce Dev.

Citation249 A.3d 872,467 N.J.Super. 131
Decision Date20 April 2021
Docket NumberDOCKET NO. A-2467-19
Parties EAST BAY DRYWALL, LLC, Petitioner-Appellant, v. DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, Respondent-Respondent.
CourtNew Jersey Superior Court – Appellate Division

Russell L. Lichtenstein, Atlantic City, argued the cause for appellant (Cooper Levinson, PA, attorneys; Russell L. Lichtenstein and Jennifer B. Barr, Atlantic City, on the briefs).

Achchana Ranasinghe, Deputy Attorney General, argued the cause for respondent (Gurbir S. Grewal, Attorney General, attorney; Jane C. Schuster, Assistant Attorney General, of counsel; Achchana Ranasinghe, on the briefs).

Before Judges Sabatino, Currier and Gooden Brown.

The opinion of the court was delivered by

SABATINO, P.J.A.D.

This administrative agency case concerns the application of the so-called "ABC Test," N.J.S.A. 43:21-19(i)(6)(A), (B), and (C), in classifying whether a company's service providers are either its employees or, conversely, independent contractors, for purposes of liability for contributions to the state unemployment and temporary disability compensation fund.

As detailed in this opinion, the parties' dispute arose out of an audit of records conducted by the Department of Labor and Workforce Development ("the Department"). Based on that review, the auditor concluded that about half of the drywall installers who provided services for appellant East Bay Drywall, LLC ("East Bay") during the pertinent years of 2013-16 had been improperly classified as independent contractors rather than as East Bay's employees. With respect to those misclassified installers, the auditor calculated that East Bay owed the Department for unpaid contributions to the fund.

East Bay disputed the auditor's findings of misclassification, and the contested case was tried in the Office of Administrative Law ("OAL") before an administrative law judge ("ALJ"). Applying the legal standards of the ABC Test, the ALJ concluded three of the individual installers had been misclassified by East Bay as independent contractors. However, the ALJ found that other installers who had formed and operated corporations or limited liability companies ("LLCs") during the audit period could not, as a matter of law, be deemed employees of East Bay in this regulatory context. Consequently, the ALJ rejected the auditor's findings except for the three individuals.

On further review, the Commissioner of the Department issued a final agency decision on January 13, 2020, reinstating in full the auditor's findings, thereby making East Bay liable for $42,120.79 in unpaid contributions to the fund, plus penalties and interest. East Bay now appeals the Commissioner's rulings.

For the reasons that follow, we affirm in part, reverse in part, and remand for recalculation of the amounts owed, consistent with this opinion.

I.

Before delving into the facts and evidence, we first briefly discuss the relevant legal context, including the ABC Test for ascertaining employee/non-employee status.

The Department administers the New Jersey Unemployment Compensation and Temporary Disability Insurance Laws (the "UCL"), N.J.S.A. 43:21-1 to -71. The "primary objective of the UCL is to provide a cushion for the workers of New Jersey ‘against the shocks and rigors of unemployment.’ " Carpet Remnant Warehouse, Inc. v. N.J. Dep't of Labor, 125 N.J. 567, 581, 593 A.2d 1177 (1991) (quoting Provident Inst. for Sav. in Jersey City v. Div. of Emp't Sec., 32 N.J. 585, 590, 161 A.2d 497 (1960) ). The Department collects revenue to fund this benefits program through contributions made by New Jersey employers and employees. The employer and employee must each contribute a specified percentage of the employee's wages to the fund. N.J.S.A. 43:21-7. In addition, a worker who is classified as an employee rather than as an independent contractor may collect unemployment benefits, if otherwise eligible and not otherwise disqualified. See generally N.J.S.A. 43:21-5 (concerning disqualification criteria); N.J.S.A. 43:21-14 (concerning eligibility conditions).

The UCL statute is remedial in nature and has been liberally construed to achieve its purposes. Carpet Remnant, 125 N.J. at 581, 593 A.2d 1177.

An important predicate for determining whether a business or individual is responsible for making payments into the UCL fund for workers is whether there is a "statutory" employer-employee relationship between the workers and the business or individual that engages them. Ibid. Such a statutory employer-employee relationship may potentially exist even if the relationship does not satisfy common-law principles of employment. Ibid. (citing Gilchrist v. Div. of Emp't Sec., 48 N.J. Super. 147, 153, 137 A.2d 29 (App. Div. 1957) ).

Under the UCL statute, "employment" consists of any service performed for remuneration or under any contact of hire, written or oral, express or implied. N.J.S.A. 43:21-19(i)(1)(A). Once it has been established that a worker's service has been performed for remuneration, that service is deemed to be employment, unless statutory criteria, commonly referred to as the "ABC Test," are all satisfied to establish non-employee status. N.J.S.A. 43:21-19(i)(6).

Specifically, the ABC Test prescribes that, for purposes of the UCL, an arrangement in which an individual performs services for remuneration is considered employment "unless and until" the following three requirements are proven:

(A) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and
(B) 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
(C) Such individual is customarily engaged in an independently established trade, occupation, profession or business.
[ N.J.S.A. 43:21-19(i)(6)(A), (B), and (C) (emphasis added).]

These three facets of the test (A, B, and C) have been explained by the Supreme Court in Carpet Remnant as follows.

"Part A of the [ABC] test requires a showing that the provider of services ‘has been and will continue to be free from control or direction over the performance of such services.’ " Carpet Remnant, 125 N.J. at 582, 593 A.2d 1177 (quoting N.J.S.A. 43:21-19(i)(6)(A) ). "The person must establish not only that the employer has not exercised control in fact, but also that the employer has not reserved the right to control the individual's performance." Ibid. "An employer need not control every facet of a person's responsibilities, however, for that person to be deemed an employee." Ibid.

"Part B of the ABC test is satisfied by a showing either that the services performed are outside the employer's usual course of business or that the service is performed outside of all of the employer's places of business." Id. at 584, 593 A.2d 1177 (emphasis added). "[S]atisfaction of either of the B standard's alternatives is a prerequisite for avoiding designation as an employee." Ibid. (citing N.J.S.A. 43:21-19(i)(6)(B) ).

"Part C of the ABC test is also inherited from the common law." Id. at 585, 593 A.2d 1177. Citing Gilchrist, the Court explained that part C's requirement that a person be customarily engaged in an independently-established business "calls for an enterprise that exists and can continue to exist independently of and apart from the particular service relationship. The enterprise must be one that is stable and lasting—one that will survive the termination of the relationship." Ibid. (quoting Gilchrist, 48 N.J. Super. at 158, 137 A.2d 29 ). "Thus, if the person providing services is dependent on the employer, and on termination of that relationship would join the ranks of the unemployed, the C standard is not satisfied." Id. at 585-86, 593 A.2d 1177. "Conversely, the C standard is satisfied when a person has a business, trade, occupation, or profession that will clearly continue despite termination of the challenged relationship." Id. at 586, 593 A.2d 1177.

The application of these three ABC criteria is highly fact-sensitive. In Carpet Remnant, for example, the Court reversed the Commissioner's finding of employee status concerning workers who performed carpet installations for the appellant company. Disagreeing with the Commissioner's findings under parts A and B, the Court held those workers were not employees because they were not, under part A, subject to the control of the company who had hired them, and also because, as to part B, they had installed the carpeting at the locations of individual customers rather than at the appellant's business office. Id. at 590-93, 593 A.2d 1177.

The Court in Carpet Remnant cited with approval, see id. at 583-84, 593 A.2d 1177, a then-recent opinion of this court in Trauma Nurses, Inc. v. Bd. of Rev., 242 N.J. Super. 135, 576 A.2d 285 (App. Div. 1990), applying the ABC Test. We held in Trauma Nurses that nursing professionals who were placed by an employment broker with hospitals and other health care facilities on a temporary basis were independent contractors and not the broker's employees. Among other things, with respect to part A of the test concerning the element of control, "the nurses were free to choose where and when to work, including working for other brokers or independently," "not obligated to comply with any rules, practices, or procedures set by [the broker]," that the broker "exercised no supervision over the nurses ... [and] provided no training," that the broker "furnished no supplies, equipment, or uniforms," that the broker "did not provide any fringe benefits," and that "the nurses were responsible for their own insurance coverage." Id. at 584, 593 A.2d 1177 (citing Trauma Nurses, 242 N.J. Super. at 144–45, 576 A.2d 285 ).

More recently, in Hargrove v. Sleepy's, LLC, 220 N.J. 289, 106 A.3d 449 (2015), the Court...

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