Employer vs. Independent Contractors? How do I decide?
A: Small business owners must perform their own due diligence when hiring and classifying workers. Owners who currently use independent contractors should consider reviewing the nature of their relationships with them.
Before classifying your workers as Independent Contractors, New Jersey employers should ensure their workers satisfy what is known as the “ABC” test:
(A) The worker is free from control and direction in the performance of the services offered; and
(B) The work your worker is doing is not part of your usual course of business; and
(C) The worker is regularly and customarily engaged in an independent business or trade for others.
All New Jersey employers classifying any worker as an Independent Contractor must ensure all three requirements are satisfied.
Before classifying workers as independent contractors, employers should consider:
- Does your worker determine how the work will be performed or are you instructing your worker how to perform the job?
- Where is the work being performed?
- Has your worker formed a registered legal business? Are you issuing payment to a business or individual?
- Does your worker perform the same work for others or are you his/her only client?
- Do you have employees performing the same job/tasks/duties as the worker?
- What language is utilized in your Independent Contractor Agreement? Does this agreement contain language which would compromise your ability to satisfy the ABC test (e.g.: “Contractor shall at all times…” or “Contractor shall perform work under the direction of…”)?
- Do you require your worker to execute a Non-compete Agreement?
- Are you micro-managing the contractor’s work?
- How much oversight do you have?
The bottom line: Don’t guess! Call me and we can see if your workers pass the “ABC” test.