Kennedy v. Weichert Co.

• Decision Date: 09 February 2023
• Docket Number: A-0518-19
• Parties: JAMES KENNEDY, II,[1] on behalf of himself and all other similarly situated persons, Plaintiff-Respondent, v. WEICHERT CO., d/b/a WEICHERT REALTORS, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

1

JAMES KENNEDY, II,^[1] on behalf of himself and all other similarly situated persons, Plaintiff-Respondent, v. WEICHERT CO., d/b/a WEICHERT REALTORS, Defendant-Appellant.

No. A-0518-19

Superior Court of New Jersey, Appellate Division

February 9, 2023

Argued March 23, 2020

Decided July 2, 2021.

Decided January 30, 2023

Remanded by the Supreme Court June 1, 2022.

Resubmitted November 9, 2022

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-2266-19.

Laddey, Clark & Ryan, LLP, John F. Birmingham (Foley & Lardner, LLP) of the Michigan bar, admitted pro hac vice, and Jennifer M. Keas (Foley & Lardner, LLP) of the District of Columbia bar, admitted pro hac vice, attorneys for appellant (Thomas N. Ryan, John F. Birmingham, Jennifer M. Keas, on the briefs).

Sattiraju & Tharney, LLP, attorneys for respondent (Ravi Sattiraju, of counsel and on the brief; Edward J. Herban and Gareth D. Horell, on the brief).

Greenbaum, Rowe, Smith & Davis, LLP, attorneys for amicus curiae New Jersey Realtors (Barry S. Goodman and Darren C. Barreiro, of counsel; Conor J. Hennessey, on the brief).

Matthew J. Platkin, Attorney General, attorney for amicus curiae New Jersey Department of Labor and Workforce Development (Mayur P. Saxena, Assistant Attorney General, of counsel; Joana Gretz, Deputy Attorney General, on the brief).

Before Judges Messano, Rose and Gummer.

OPINION

MESSANO, P.J.A.D.

As we explained in our prior opinion, plaintiff James Kennedy, II, was a fully commissioned real estate salesperson with defendant Weichert Company, a licensed real estate broker. Kennedy v. Weichert Co., No. A-0518-19 (App. Div. July 2, 2021) (slip op. at 2). Plaintiff alleged on behalf of himself and a putative class of those similarly situated that defendant had violated N.J.S.A. 34:11-4.4, a provision of the Wage Payment Law (WPL), N.J.S.A. 34:11 -4.1 to -4.14.

The WPL "governs the time and mode of payment of wages due to employees." Hargrove v. Sleepy's, LLC, 220 N.J. 289, 302 (2015). Unless permitted by law as an exception in the statute or otherwise, the WPL prohibits an "employer" from "withhold[ing] or divert[ing] any portion of an employee's wages." N.J.S.A. 34:11-4.4. With limited exceptions, the WPL also makes it "unlawful for any employer to enter into or make any agreement with any employee for the payment of wages . . . otherwise than as provided in [the WPL]." N.J.S.A. 34:11-4.7.

Plaintiff claimed defendant had violated N.J.S.A. 34:11-4.4 "by deducting marketing, insurance, and other expenses "from plaintiff's wages without authorization. Kennedy, slip op. at 2. Defendant moved to dismiss plaintiff's complaint for failure to state a claim as a matter of law and argued "that fully commissioned real estate salespersons are independent contractors, whom the WPL does not cover." Kennedy, slip op. at 2 (citing N.J.S.A. 34:11-4.1). Under the WPL, "'Employee' means any person suffered or permitted to work by an employer, except that independent contractors . . . shall not be considered employees." N.J.S.A. 34:11-4.1(b).

The Law Division judge denied defendant's motion "after declaring that the 'ABC test' under the Unemployment Compensation Law (UCL), N.J.S.A. 43:21-19(i)(6)(A), (B), and (C), determines a real estate salesperson's status as an independent contractor under the WPL." Id. at 2-3. In this regard, the judge followed the Court's holding in Hargrove "that the 'ABC' test derived from . . . [the UCL], governs whether a plaintiff is an employee or independent contractor for purposes of resolving a wage-payment or wage-and-hour claim." 220 N.J. at 295.

We granted defendant's motion for leave to appeal. Kennedy, slip op. at 6. Among other things, defendant argued the ABC test did not apply to fully commissioned real estate salespersons because the UCL expressly exempts them from its reach. Kennedy, slip op. at 15; see N.J.S.A. 43:21-19(i)(7)(K) ("[T]he term 'employment' shall not include . . . [s]ervices performed by real estate salesmen or brokers who are compensated wholly on a commission basis"). We rejected that argument, "conclud[ing] that the UCL's special treatment of commissioned real estate salespersons d[id] not render the ABC test inappropriate to determine a real estate salesperson's independent-contractor status under the WPL." Kennedy, slip op. at 20.^[2] Defendant also argued that application of the ABC test was inconsistent with the Real Estate Brokers and Salesmen Act (the Brokers Act), N.J.S.A. 45:15-1 to -29.5. Kennedy, slip op. at 20. We traced relevant 2018 amendments to the Brokers Act and noted

[t]he 2018 statute included a provision expressly stating that "[n]otwithstanding any provision of . . . [the Brokers Act] or any other law, rule, or regulation to the contrary, a business affiliation between a broker and a broker-salesperson or salesperson may be that of an employment relationship or the provision of services by an independent contractor." L. 2018, c. 71, § 3(b), codified at N.J.S.A. 45:15-3.2(b). The amendments required that every salesperson enter into a written agreement with his or her broker before starting work, L. 2018, c. 71, § 3(a), codified at N.J.S.A. 45:15-3.2(a), and "[t]he nature of the business affiliation shall be defined in the written agreement," L. 2018, c. 71, § 3(b), codified at N.J.S.A. 45:15-3.2(b). The amendments also added the words "or contracted" almost everywhere the word "employed" was found in the act, and added "or contractors" after the word "employees." See L. 2018, c. 71.

[Kennedy, slip op. at 22-23 (alterations in original).]

We recognized that as a result of these amendments, the Brokers Act "may affect the application of a test for determining a real estate salesperson's employment status under the WPL[,]" because "[b]ased on the 2018 statute's plain language, the Legislature evidently concluded that an independent contractor relationship could subsist, even though a broker exercised the extensive controls over his or her salespersons that the Brokers Act required." Id. at 23-24. We reasoned, "[I]t would be inconsistent with the intent of the 2018 statute to apply an employment status test," such as the ABC test, "in . . . a way that it would deny independent-contractor status solely on the basis of compliance with Brokers Act requirements." Id. at 24.

Nonetheless, we also concluded the 2018 amendments were "prospective in effect." Id. at 29. And because the amendments became effective August 10, 2018, "at most, they c[ould] have only a minor impact" on plaintiff's claim, which sought "damages for the period between August 8, 2012 and November 6, 2018." Ibid. Although we affirmed denial of defendant's motion to dismiss because the ABC test applied to plaintiff's pre-August 2018 claims, we took note of "the slim record before us," including the lack of any written agreement between plaintiff and defendant during the relevant timeframe. Id. at 29-30. As a result, "we decline[d] to declare the [Brokers Act] amendments' impact" on plaintiff's claims "for that brief period" between August and November 2018. Id. at 29.

On November 16, 2021, the Court granted defendant leave to appeal from our judgment. Kennedy v. Weichert Co., 249 N.J. 66 (2021). While the appeal was pending, the Legislature acted.

I.

The 2018 amendments added an entirely new section to the Brokers Act that provided:

a. No . . . salesperson shall commence business activity for a broker and no broker shall authorize a . . . salesperson to act on the broker's behalf until a written agreement, as provided in this subsection, has been signed by the broker and . . . salesperson. Prior to an individual's commencement of business activity as a . . . salesperson under the authority of a broker, the broker and . . . salesperson shall both sign a written agreement which recites the terms under which the services of the . . . salesperson have been retained by the broker.

b. Notwithstanding any provision of [the Brokers Act] or any other law, rule, or regulation to the contrary, a business affiliation between a broker and a . . . salesperson may be that of an employment relationship or the provision of services by an independent contractor. The nature of the business affiliation shall be defined in the written agreement required pursuant to subsection a. of this section.

[N.J.S.A. 45:15-3.2 (Section 3.2) (emphasis added).]

On December 6, 2021, less than one month after the Court had granted leave to appeal, the Legislature introduced A. 6206, which sought to amend Section 3.2 to include the following language:

If a current or previously written agreement exists or existed between the broker and the . . . salesperson that defines, sets forth, identifies, or provides that the salesperson is or at any time has been an independent contractor of the broker, the . . . salesperson shall be deemed to . . . have been an independent contractor during the period in which the agreement is or was effective and shall not be classified as an employee for any purpose under any law, rule, or regulation for that period of time, except that the . . . salesperson shall satisfy the test set forth in [N.J.S.A.] 43:21-19(i)(7)(K) in order to be deemed an independent contractor under [the UCL]. The . . . salesperson shall not be required to satisfy any other test for any other law, rule, or regulation, including, but not limited to, the tests set forth at or applied to [the WPL] . . . to be deemed an independent contractor as provided in this section for purposes of any other law, rule or regulation.

....

This act shall take effect immediately and shall apply retroactively to enforce but not change any written agreement between a . . . salesperson and a broker where

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