Hargrove v. Sleepy’s – The New Jersey Supreme Court approves ABC test for Independent contractor lawsuits

January 15, 2015

Hargrove v. Sleepy’s is a New Jersey Independent Contractor misclassification lawsuit that I filed many years ago, when I was still a partner at Cureton Clark.  After the trial court ruled against my three mattress delivery truck drivers, Marchetti Law appealed to the Third Circuit Court of Appeals, arguing that the federal district court had applied an incorrect standard.  The Third Circuit found that the applicable test of employment status under the New Jersey Wage Payment Law and Wage and Hour Law (overtime) was unclear, and referred the case to the New Jersey Supreme Court.

After extensive briefing, which included many friend of the court briefs from national organizations, oral argument was held on March 17, 2015.  At argument, I took a lot of shrapnel from the panel for suggesting that the burden of proof should be upon the employer under the ABC test that is used in the Unemployment context and in states like Mass. and IL that have strong worker protection laws.  Importantly, the Attorney General agreed with my analysis.

On January 15, 2015, we received a 6-0 unanimous decision from the Court and were pleased that the entire Court decided to apply the ABC test that we had suggested – including the burden of proof.  This test requires that a company seeking to avoid paying overtime or to permit unlawful wage deductions and chargebacks must meet the following three criteria:  A) The worker is free from control, B) the work is outside the ordinary course of the employer’s business or is performed outside all places of the employer’s business, and C) that there is an actual operating independent business that would survive termination from the employer.  If the employer cannot show any one of these three factors, the worker is an employee, regardless of what the contract says.  This is a huge development in this area of the law, and really a high point of my career.

The Supreme Court rejected the “direct contract” argument, which means that the existence of a single purpose LLC does not make one a contractor.  The Supreme Court also rejected the “freedom of contract” argument, because, under the statute, an employee cannot waive basic protections.

With this decision, we will see an influx of lawyers trying to develop this area of business.  The problem is that these schemes are complex, well-funded and we have seen others who are quick to bring and settle such cases cheaply.  I have a new client who recently settled one of these cases with another attorney for pennies on the dollar which is anything but justicee.

Call me if you think you have an independent contractor lawsuit.

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