New Jersey: Independent Contractor Test Clarified


All Employers with NJ Independent Contractors


August 2, 2022



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In East Bay Drywall, LLC. v. Department of Labor and Workforce Development, the Supreme Court of New Jersey stated that formation of a corporation or LLC did not automatically mean that an individual qualifies as an independent contractor for purposes of the New Jersey Unemployment Compensation Act. New Jersey uses the “ABC” test to determine employment status. Specifically, prong “C” requires that an individual must be customarily engaged in an independently established trade, occupation, profession or business. However, the court stated that mere corporation status, even with business registration and insurance information, was not necessarily enough to satisfy this requirement. 


There, a contractor would use subcontracted workers to perform work on its jobs, which could be individuals, LLC’s, or corporations. The Court said that prong “C” requires the independent contractor’s business to be able to go on despite termination of the contractor relationship. This may include presentation of evidence that the contractor was free to accept or decline assignments and that they performed work for other companies, that the contractor engaged in advertising, maintained independent locations, or had employees. 


Notwithstanding, the Court stated that a business registration and certificate of insurance could be a significant indication of independent contractor status if they demonstrate a complex ownership structure and continued in force beyond the contractor relationship. 

 Action Items 

  1. Review independent contractor status with legal counsel for compliance. 
  2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance. 


Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2022 ManagEase