Last week, the New Jersey Supreme Court ruled in Hargrove v. Sleepy’s, LLC that the “ABC” test should be used in determining employee or independent contractor status under New Jersey wage laws, namely, the NJ Wage Payment Law and the NJ Wage and Hour Law. This decision is significant as the ABC test is broader and imposes stricter standards upon employers in comparison to other tests used to determine independent contractor status under other employment laws.

Under the ABC test, an individual is presumed to be an employee unless the company can show the following three elements: (A) that the individual has been and will continue to be free from the company’s control or direction over the performance of their service, both by contract and in fact; (B), that the service provided by the individual is outside the usual course of the business for which such service is performed, or that the service is performed outside of all places of business of the company; and (C) that the individual is customarily engaged in an independently established trade, occupation, professional or business.   If the company fails to prove all three of these factors, then the individual will be classified as an employee – not an independent contractor – under New Jersey wage laws.

The Hargrove case was brought by delivery drivers who alleged Sleepy’s misclassified them as independent contractors, which resulted in both financial and non-financial losses to them.   The district court held in favor of Sleepy’s and ruled that the plaintiffs were properly classified as independent contractors pursuant to different test. Plaintiffs then appealed, and the Third Circuit Court of Appeals sought certification from the Supreme Court of New Jersey regarding what test should be used to determine employment status for purposes of the NJ Wage Payment Law and the NJ Wage and Hour Law.   As explained above, the Supreme Court held that the ABC test should be applied.

To read the full decision, please click here. This firm will continue to monitor the developments in this case.