A recent New Jersey worker misclassification settlement is serving as a reminder that businesses and non-profits face growing scrutiny over how they classify workers and may face increased exposure to both government enforcement actions and private litigation.
The development comes as New Jersey prepares to implement amendments to its “ABC Test,” which is used to determine whether workers are independent contractors or employees. Effective October 1, the revised rules presume workers are employees unless an employer can satisfy all three prongs of the test.
McCarter & English partner Thomas Doherty spoke with the New Jersey Law Journal about the implications of the upcoming changes. He said the amended rules will “give the NJDOL more traction in bringing these enforcement actions on its own, and not just relying on private litigants vindicating these rights.” He noted that the revised ABC Test, once in effect, could provide fertile ground for both government enforcement and private lawsuits.
With the state now having a private right of action under a 2021 law and the upcoming ABC test refinements, Tom cautioned employers to use the time to reexamine worker classifications. “If they have reason to think those classifications are subject to challenge, it would probably be a good time to reclassify workers, rather than take the chance they will not be targeted by the Department of Labor in a future enforcement action,” Tom said.
“I think within the last 10 years or so, I’ve been seeing more misclassification allegations being made, either in demand letters or in actual filed lawsuits, so now the double whammy of having the state file its own lawsuit and/or having a litigant pursue his or her own lawsuit, potentially on a class-wide basis … all this could lead to additional risks for businesses who choose to have their workforce staffed by contractors as opposed to W-2 employees,” Tom added.