An independent contractor, for purposes of New Jersey unemployment and disability coverage, is statutorily defined. This statutory definition is unique in that there is no clear definition of an employee or independent contractor for federal employment tax purposes or for New Jersey gross income tax withholding.

In the absence of a federal definition for "employee" courts have sought to define an employee by applying the common-law definition of "servant," which is limited to the degree of control the employer exercises over the means, method and details of how the work is performed.

In New Jersey, a statutory employee-employer relationship can exist even if a contrary determination could be made based upon only common-law principles. Judicial reviews by both the Appellate Division of New Jersey's Superior Court and the Supreme Court accept this as a result of the remedial nature of the unemployment program.

The New Jersey Unemployment Compensation Law at 43:21-19(i)(6) states;

"Services performed by an individual for remuneration shalt be deemed to be employment subject to this chapter (R.S.43:21-1 et seq.) unless and until it is shown to the satisfaction of the division that:

(A) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and
(B) Such service is either outside the usual course of the business for which service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
(C) Such individual is customarily engaged in an independently established trade, occupation, profession or business.

The above become known as the ABC Test. And as simple as this may sound, in a landmark New Jersey Supreme Court decision that sets the framework for determining this issue, Associate Justice O'Hern begins his dissent "Only lawyers and judges could complicate something as simple as an ABC test".

EXCERPTS FROM CARPET REMNANT WAREHOUSE, INC.
SUPREME COURT OF NEW JERSEY
Argued March 11, 1991 - Decided August 6, 1999

Test "4"
"Specific factors indicative of control include whether the worker is required to work any set hours or jobs, whether the enterprise has the right to control the details and means by which the services are performed, and whether the services must be rendered personally."

Test "B"
"In our view, that phrase refers only to those locations where the enterprise has a physical plant or conducts an integral part of its business."

Test "C"
"In our view, the C standard provides the closest connection between the obligation to pay taxes and the eligibility for benefits." The court added, ‘Thus, if the person providing services is dependent on the employer and on termination of that relationship would join the ranks of the unemployed, the C standard is not satisfied. Conversely, the C standard is satisfied when a person has a business, trade, occupation or profession that will clearly continue despite termination of the challenged relationship." And again, "in cases in which satisfaction of the C standard convincingly demonstrates a. person's ineligibility for unemployment benefits, it would be inappropriate for the Commissioner to apply the A or B tests restrictively and mechanically if their applicability is otherwise uncertain."

Carpet Remnant Warehouse v. New Jersey Department of Labor
The New Jersey Supreme Court's 1991 ruling has given clear direction to the Department of Labor, the Office of Administrative Law and the courts on how to apply the independent contractor test contained in the Unemployment Compensation Law. An examination should determine if an individual could continue to exist independently of and apart from the challenged relationship. The determination should take into account for each individual in dispute:

1. The duration and strength of the business or enterprise.
2. The number of customers and the respective volume of business of each customer.
3. The number of employees, if any.
4. The extent of tools, equipment, vehicles or other resources.
5. The amount of remuneration from the challenged relationship compared to the remuneration received from other customers.

Aladdin Service Corporation v. Department of Labor
This 1999 Appellate Court decision affirms the Commissioner of Labor's determination holding the carpet installers of this entity as employees. The Court noted that this decision "fully comports with the principles set out in Carpet Remnant Warehouse, Inc. v. New Jersey Department of Labor." The Commissioner's determination was based on the following unchallenged findings of fact:

1. No evidence was offered during the OAL hearing that any installers had engaged in a business relationship with companies other than Aladdin.
2. No evidence was produced by way of schedule C tax forms, which would indicate that the installers received income from other business.
3. Nothing in the record shows that the installers utilized their own business stationery.
4. Nothing in the record shows that the installers advertised in the yellow pages or in a professional publication.
5. No evidence was produced to indicate the insta1lers used their own billing statements.
6. No evidence was produced to indicate the installers used a trade name.
7. No evidence was produced to indicate the installers had a business telephone number.
8. No evidence was produced to indicate the installers were incorporated or in a business partnership or registered as a State or federal employing unit.
9. No evidence was produced to indicate the installers rented or leased office space.
10. No evidence was produced to indicate the installers had a significant investment in an independent business.

Subcontractor Information Sheet for Non-Corporate Subcontractors

Subcontractor Name_________________________________
Fed I.D. #_________________________________
S.S. #_________________________________
1. Trade Name:_________________________________
2. County(ies) registered to do business _________________________________
3. Business Address:_________________________________
4. Business Phone: _________________________________
5. Business Bank Reference:_________________________________
6. Account Number_________________________________
7.Name of Worker's Compensation Insurance
   Carrier_________________________________
   Policy Number_________________________________
8. Name of Liability Insurance Carrier_________________________________
   Policy Number_________________________________
9. Number of workers:_________________________________
10. Are you a registered employer with the New Jersey Department of Labor?_________________________________*
11. Are you filing forms 927 & WR-30 to the New Jersey Division of Revenue?_________________________________*

STATEMENT OF SUBCONTRACTOR:

I certify I am established in a business that exists independently of and would continue if my relationship with_________________________________Inc. were terminated. I have been in business for______________ years and I have approximately_________________ customers.

I certify that I am an independent contractor, established in a business that would continue if my relationship with _________________________________ terminates. As evidenced by my certification above, I have sufficient business activities that my business existence is not dependent on_________________________________.

I HAVE ATTACHED HERETO A TRUE COPY OF MY BUSINESS CARD AND/OR A CONTRACT/BILLING INVOICE CURRENTLY UTILIZED BY MY BUSINESS.

SIGNATURE:_________________________________
DATE: _________________________________

* If this information is missing or you are not registered and reporting to the New Jersey Department of Labor, you will be treated as an employee for purposes of New Jersey unemployment and temporary disability. A copy of this form will be forwarded to the Chief Auditor's Office of the New Jersey Department of Labor, P.O. Box 942, Trenton, NJ 08625-0942.

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