Q:  A company hires merchandisers to create displays of its products at various retail stores.  The merchandisers are hired solely as independent contractors under written contracts and on a 1099 basis. Merchandisers are free to accept or decline work, or they can accept a job and subcontract it out.  They are also free to perform similar work for other companies but currently, none of the merchandisers work for any other companies. Are the merchandisers valid “independent contractors” or are they “employees” under the NJ Dept. of Labor “ABC” test?
A:  In Spar Marketing Service, Inc. v. NJ Dept. of Labor, the Appellate Division agreed with the DOL that merchandisers hired under a similar fact pattern were employees and upheld the DOL’s assessment against Spar Marketing for unpaid contributions to unemployment and disability insurance payments to the State.  The Appellate Division explained that while the merchandisers were free from control or direction over the performance of services (satisfying part “A” of the test) and the services were outside the usual course of business for the employer (satisfying part “B” of the test), the employer did not meet part “C” by showing that the merchandisers were customarily engaged in an independently established trade or business.  There was no evidence that the merchandisers had worked as independent contractors for any other company or that they had any business relationships with other companies during the audit period. The fact that the merchandisers were allowed to work for other companies was of little import since the employer could not show that the business of the merchandisers “exist and can continue to exist independently of and apart from the particular” relationship with the employer.  With DOL audits on the rise, companies should review and possibly rethink their independent contractor agreements and relationships.

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