NJCJI became involved in East Bay Drywall, LLC v. Dep’t of Labor and Workforce Development, No. A-7-21, because the Attorney General’s Office and Department of Labor were seeking to fundamentally redefine the meaning of the ABC test’s “places of business” B-prong. More than thirty years ago, in Carpet Remnant Warehouse, Inc. v. Dep’t of Labor, 125 N.J. 567 (1991), the Supreme Court said that when an enterprise sent workers to install carpet in customers’ homes and workplaces, those remote job sites were not the enterprise’s “places of business.” In East Bay, which involved workers traveling to job sites to install drywall, the Department sought a different outcome. But the Supreme Court declined in East Bay to revisit Carpet Remnant.
The Labor Commissioner found East Bay misclassified sixteen workers as contractors on several grounds, including that East Bay failed to demonstrate to the Commissioner’s satisfaction that the workers were engaged in independent businesses that would survive the end of their relationship with East Bay, as is necessary to satisfy the C prong. Appearing as amicus curiae, NJCJI asked the Supreme Court to provide clarification as to what a business in East Bay’s position must do to satisfy the C prong, and the Supreme Court did so by holding that so long as the Commissioner’s decision is not arbitrary and capricious, the Commissioner may reject a business’s showing as insufficient. The Supreme Court expressed deep concern about worker misclassification in the construction industry and reinforced that the burden for satisfying all prongs of the ABC Test is on the employer, not the Commissioner. Going forward, therefore, businesses that classify workers as contractors will need to collect more evidence from those workers that they operate independent businesses.
Because the Supreme Court decided the case in the Commissioner’s favor on C prong grounds, it did not reach the Commissioner’s B-prong arguments. It cited Carpet Remnant, and it suggested that if the Commissioner wants to hold businesses to a different standard, the State should adopt regulations defining “places of business” differently than the Court did in Carpet Remnant. Businesses should remain vigilant against any attempt to redefine the B prong in this way, as it would make the B prong effectively impossible to satisfy whenever a business sends workers to remote job sites.
NJCJI thanks Jeff S. Jacobson, Esq. and his team at Faegre Drinker for their exceptional and nuanced advocacy in this case.