Some employers and employees will be affected by unique circumstances, including but not limited to the following situations.
If you have any questions regarding exempt employment, please call the Employer Status Unit at 609-633-6400, option 2.
An employer is not liable for Unemployment or Temporary Disability contributions for services performed by an independent contractor.
To be considered as an independent contractor, an individual must retain all control or direction over the services rendered. The services rendered by an individual are either outside the usual course of the business for which such services are performed, or that such services are performed outside of all the places of the business of the enterprise for which services are performed.
In addition, the independent contractor must be customarily engaged in the established trade or business which should have been existence prior to its association with the employer, and which trade or business should be independent to the point that it could survive if the relationship between the employer and the independent contractor were terminated.
An independent contractor advertises his or her services, is in a position to realize a profit or suffer a loss, and has an investment in its business.
The "ABC test" can help you make this determination. Per New Jersey Unemployment Compensation Law, a worker should be considered an employee unless all the following circumstances apply:
- The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
- The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
- The individual is customarily engaged in an independently established trade, occupation, profession or business.
Employers must understand that once an individual provides remunerated services, this constitutes employment, unless the services are exempt, or the statutory requirements for the ABC test have been met.
In New Jersey, because the statute is remedial and its provisions construed liberally, a statutory employee-employer relationship can be found even though that relationship may not satisfy 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 determination of employee v. independent contractor status is particularly difficult in certain situations. It is important to know the law and regulations; the consequences for not knowing can be significant. The use of a questionnaire will aid the employers in making sure that they get all the information needed in classifying individuals they hire. The Worker Classification Questionnaire which the Department’s auditors and investigators use to evaluate if a relationship of an individual with the company is that of an independent contractor or employee under the New Jersey Unemployment Compensation Law is available in this website.
When an employee performs services for the same employer in New Jersey and in some other state(s), the question of whether that employee is covered by the New Jersey Unemployment compensation Law is determined by the tests of N.J.A.S. 43:21-19(i)(2)(A) and (B).
The Application of these tests will result in the reporting to one state of the employee's total wages in all states. The tests are to be applied to the employee, not the employer, in the following order: (A) localization of service; (B) base of operations; (C) place of direction and control; (D) residence of employee.
NOTE: If one half or more of the services in any pay period by an individual for employing unit constitutes employment covered by the law, all services performed in that period are covered.
- Agricultural labor performed for an entity whose only business activity is agricultural, if there have not been ten or more workers for some portion of a day in each of 20 different weeks (whether or not such weeks were consecutive in a calendar year), or $20,000 in cash remuneration in any calendar quarter.
- Domestic service in a private home if gross cash remuneration for such service in any calendar quarter is less than $1,000.
- Where the employing unit is a sole proprietorship service performed by an individual in the employ of his (or her) son, daughter, or spouse, and service performed by a child under the age of eighteen in the employ of his (or her) father or mother.
- Service in the employ of fraternal beneficiary societies, order, or associations operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system and providing for the payment of life, sick, accident or other benefits to the members of such a society, order, or association, or their dependents.
- Service in the employ of the board of directors, a board of trustees, a board of managers, or a committee of any bank, building and loan or savings and loan association, incorporated or organized under the laws of this state or the United States, where such services do not constitute the principal employment of the individual.
- Service with respect to which Unemployment Compensation is payable is under the Railroad Unemployment Insurance Act (52 stat. 1094).
- Service by agents of mutual fund brokers or dealers in the sale of mutual funds or other securities, by agents of investment companies, who are compensated wholly on a commission basis.
- Service by real estate salespeople or brokers who are compensated wholly on a commission basis.
- Service in the employ of any veterans' organization chartered by act of Congress or of any auxiliary thereof, no part of the net earnings of which organization, or auxiliary thereof, inures to the benefit of any private shareholder of individual.
- Service for the owner or operator of any theatre, ballroom, amusement hall, or other place of entertainment, not in excess of ten weeks in any calendar year for the same owner or operator, by any leader or musician of a band or orchestra, commonly called a "name band," entertainer, vaudeville artist, actor, actress, singer, or other entertainer.
- Service by an individual for a labor union organization, known and recognized as a union local, as a member of a committee or committees reimbursed by the union local for time lost from regular employment or as part-time officer of a union local when the remuneration for such services is less than $1000 in a calendar year.
- Service performed in the sale or distribution of merchandise by home-to-home salesperson or in-the-home demonstrators whose remuneration consists wholly of commissions or commissions and bonuses.
- Service performed in the employ of a hospital as a student nurse, or intern, or by a patient of the hospital.
- Service in an educational institution by a student or by the spouse of a student, if the spouse is advised that the employment is part of a program of financial aid for the student who is enrolled at said institution on a full-time basis.
- Service performed by an individual enrolled at a non-profit or public institution as part of a work-study program, if the institution certifies the employer as a participant in the program.