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
A: In Spar Marketing Service, Inc. v. NJ Dept.
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
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
of the test) and the services were outside the usual course of business
employer (satisfying part “B” of the test), the employer did not meet
by showing that the merchandisers were customarily engaged in an
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
during the audit period. The fact that the merchandisers were allowed
for other companies was of little import since the employer could not
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
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