Hargrove v. Sleepy's, LLC

• Decision Date: 14 January 2015
• Docket Number: A-70 September Term 2012, 072742
• Citation: 220 N.J. 289,106 A.3d 449
• Parties: Sam HARGROVE, Andre Hall and Marco Eusebio, Plaintiffs–Appellants, v. SLEEPY'S, LLC, Defendant–Respondent, v. I Stealth, Eusebio's Trucking Corp., and Curva Trucking, LLC, Third–Party Defendants.
• Court: New Jersey Supreme Court

220 N.J. 289

106 A.3d 449

Sam HARGROVE, Andre Hall and Marco Eusebio, Plaintiffs–Appellants

v.SLEEPY'S, LLC, Defendant–Respondent

v.I Stealth, Eusebio's Trucking Corp., and Curva Trucking, LLC, Third–Party Defendants.

A-70 September Term 2012, 072742

Supreme Court of New Jersey.

Argued March 17, 2014.

Decided Jan. 14, 2015.

Anthony L. Marchetti, Jr., Mt. Laurel, and Harold L. Lichten, a member of the Massachusetts bar, argued the cause for appellants (Marchetti Law, attorney).

Matthew J. Hank, a member of the Pennsylvania bar, argued the cause for respondent (Littler Mendelson, attorneys; Mr. Hank, Kimberly J. Gost, Elizabeth Tempio Clement, and Holly E. Rich, Philadelphia, on the briefs).

Donna S. Arons, Deputy Attorney General, argued the cause for amicus curiae Department of Labor and Workforce Development (John J. Hoffman, Acting Attorney General of New Jersey, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel).

Melville D. Miller, Jr., President, argued the cause for amicus curiae Legal Services of New Jersey (Mr. Miller, attorney; Mr. Miller, Keith G. Talbot, Akil S. Roper, Edison, and Sarah S. Hymowitz, on the brief).

David A. Tykulsker, Montclair, submitted a brief on behalf of amicus curiae International Brotherhood of Teamsters (David Tykulsker & Associates, attorneys).

Richard M. Schall, Moorestown, and Bennet D. Zurofsky, Newark, submitted a brief on behalf of amici curiae National Employment Lawyers Association of New Jersey, New Jersey Industrial Union Council, and National Employment Law Project (Schall & Barasch, attorneys).

Richard M. Hluchan, Marlton, submitted a brief on behalf of amicus curiae National Federation of Independent Business Small Business Legal Center (Hyland Levin, attorneys; Mr. Hluchan and Mark N. Suprenant, on the brief).

Denise M. Keyser submitted a brief on behalf of amicus curiae Academy of New Jersey Management Attorneys (Ballard Spahr, attorneys; Ms. Keyser and Amy L. Bashore, Cherry Hill, on the brief).

Opinion

Judge CUFF (temporarily assigned) delivered the opinion of the Court.

This matter presents a question of law certified and submitted by the United States Court of Appeals for the Third Circuit pursuant to Rule 2:12A–1. We have been asked which test a court should apply under New Jersey law to determine an employee's status for purposes of the Wage Payment Law (WPL), N.J.S.A. 34:11–4.1 to –4.14, and the Wage and Hour Law (WHL), N.J.S.A. 34:11–56a to –56a38. We conclude that the “ABC” test derived from the New Jersey Unemployment Compensation Act, N.J.S.A. 43:21–19(i)(6), governs whether a plaintiff is an employee or independent contractor for purposes of resolving a wage-payment or wage-and-hour claim.

I.

Plaintiffs Sam Hargrove, Andre Hall, and Marco Eusebio (collectively plaintiffs) deliver mattresses ordered by customers from defendant Sleepy's, LLC. Plaintiffs assert that they are employees of Sleepy's, that Sleepy's miscategorized them as independent contractors, and that such misclassification caused various financial and non-financial losses to them. Plaintiffs assert that the Independent Driver Agreement signed by each of them was a ruse to avoid payment of employee benefits, such as health insurance, deferred compensation benefits, and medical or family leave. They allege that the misclassification violates state wage laws.

The issue of whether plaintiffs are employees or independent contractors was submitted to the United States District Court for the District of New Jersey on cross motions for summary judgment. United States District Judge Peter Sheridan held that the undisputed facts demonstrated that plaintiffs were independent contractors. The district court relied on the factors identified in Nationwide Mutual v. Darden, 503 U.S. 318, 112 S.Ct. 1344, 117 L.Ed. 2d 581 (1992), an opinion that identified the factors to be considered in defining an employee under the Employment Retirement Income Security Act (ERISA), 29 U.S.C.A. §§ 1001 –1461.

Plaintiffs filed a notice of appeal. Following oral argument, the Court of Appeals filed a petition with this Court seeking to certify a question of law pursuant to Rule 2:12A–1. The Court of Appeals posed the following question: “Under New Jersey law, which test should a court apply to determine a plaintiff's employment status for purposes of the New Jersey Wage Payment Law, N.J.S.A. [ ]34:11–4.1, et seq., and the New Jersey Wage and Hour Law, N.J.S.A. [ ]34:11–56a, et seq. ?” This Court granted the petition. 214 N.J. 499, 70 A. 3d 592 (2013).

II.

A.

Plaintiffs argue that a single test should apply to determine employment status. They emphasize that misclassification of employees as independent contractors creates significant societal costs due to billions of dollars in lost revenue to state and federal governments. Plaintiffs advance three alternative tests that might control the resolution of the central issue in the case. They contend that this Court should conclude “at the very least” that the hybrid “relative nature of the work” test set forth in D'Annunzio v. Prudential Insurance Co. of America, 192 N.J. 110, 927 A. 2d 113 (2007), should be adopted for purposes of determining employment status under this State's wage laws. In the alternative, plaintiffs argue that this Court should adopt the broad “ABC” test followed by the New Jersey Department of Labor (DOL) to interpret and apply the definitions contained in the WHL to resolve WHL and WPL claims. If this Court concludes that neither the hybrid “relative nature of the work” test nor the “ABC” test governs, plaintiffs urge application of the “economic realities” test as under the Fair Labor Standards Act (FLSA), 29 U.S.C.A. §§ 201 –19. Plaintiffs urge that in no event should this Court conclude that the common law “right to control” test applies. They contend that the common law test was designed to determine whether a master was liable to third parties for the negligent acts of an agent and was never intended to protect or address the financial security of employees.

B.

Defendant urges the adoption of a two-tiered analysis for determining employee status under the WPL. First, the plaintiff should be required to prove that the defendant is contractually obligated to pay wages to him or her. If that prong is established, a court should proceed to determine whether that contract rendered the plaintiff an employee or independent contractor. According to defendant, the second prong should be analyzed in accordance with the “control” test derived from the Restatement (Second) of Agency § 220(2) (1958). Defendant emphasizes that this test existed at the time of adoption of the WPL and that the courts of this State have long used this test to determine whether an individual was an independent contractor. Defendant reasons that this test likely informed the Legislature when it drafted and adopted the WPL.

Defendant urges this Court not to decide the governing test for determining employee status under the WHL because plaintiffs have not referred to this statute in their complaint. Defendant urges this Court to apply the “economic realities” test as under FLSA, should it address the WHL.

C.

This certified question has attracted the interest of several associations, organizations, a union, legal services projects, and the Department of Labor and Workforce Development of the State of New Jersey.¹ Some amici curiae emphasize that misclassification of employees as independent contractors is now common in many industries, causing a cumulative societal effect of less protection for an increasing number of workers and reduced revenue to the federal and state governments due to unpaid taxes and assessments. Other amici urge that there is little valid justification to re-order economic relationships that would occur from an expansive construction of the term “employee.” These amici urge a narrow construction of “employee” that recognizes and preserves the legitimate role that true independent contractors play in our modern economy.

Specifically, amicus curiae International Brotherhood of Teamsters (IBT) urges that the Court should use the “relative nature of the work” standard as a supplement to the “right to control” test to distinguish between an employee and an independent contractor.

IBT notes that other regulatory schemes that utilize the “suffer or permit” language have interpreted the phrase to reach those traditionally considered independent contractors, such as musicians and dancers regularly employed at bars and restaurants, if the activity furthers the business of the regulated enterprise. See, e.g., G. & J.K. Enters., Inc. v. Div. of Alcoholic Beverage Control, 205 N.J.Super. 77, 500 A. 2d 43 (App.Div.1985) (holding regulation reaches dancers regularly appearing at bar), certif. denied, 102 N.J. 397, 508 A. 2d 255 (1986) ; Freud v. Davis, 64 N.J.Super. 242, 165 A. 2d 850 (App.Div.1960) (holding regulation reaches drummer regularly playing at bar). IBT also cites a plethora of wage-and-hour laws enacted in other states that have interpreted the “suffer or permit” language that appears in the WPL and WHL to embrace “so-called independent contractors who were economically dependent on the enterprise and whose work advanced the business of the enterprise[.]”

Amicus curiae Legal Services of New Jersey (LSNJ) urges the Court “to embrace a test that reflects the full historical breadth of the statutory ‘suffer and permit’ language,” and one that will “be flexible enough to apply readily to a full range of foreseeable circumstances and evasive schemes.” LSNJ urges a “totality of the circumstances” test that includes the following considerations: control, functional integration, economic dependence, and the direct or indirect power through the exercise of reasonable diligence to avoid or rectify statutory violations. LSNJ asserts that this test harmonizes and unifies federal and other state jurisprudence in the wage-enforcement context with the DOL independent-contractor...