New York and New Jersey both have established rules that clarify when someone who works for a company is an employee as opposed to an independent contractor.
The difference between an employee and independent contractor is important. Employees have the benefit of state and federal minimum wage and overtime laws, and they also enjoy other legal protections as well.
Relatively, independent contractors have few protections, and they may be paid by the job no matter how many hours they work. If a business misclassifies an employee as an independent contractor, that employee can wind up seriously underpaid and without benefits they should receive.
Sometimes, it is difficult to tell the difference between an independent contractor and an employee.
Workers should not simply take their employer’s word about their status
Both New York and New Jersey have tests that courts and agencies use in their respective states to decide whether a worker is an employee or an independent contractor.
The outcome of these tests will depend on each situation. Every case must be evaluated on its own circumstances.
However, it may be helpful for workers in these states to understand what does not make a worker an independent contractor:
- Your boss’s say so does not make you an independent contractor. This is true even if the boss puts this sort of language in a formal document like a handbook.
- Even your agreement that you are an independent contractor does not make you an independent contractor.
- Likewise, the fact your employer gives you a Form 1099 for your taxes instead of a W-2 does not make you an independent contractor.
- The fact you are operating as an organized business entity, like an LLC or corporation, does not make you an independent contractor.
- The fact you do other work in your trade or profession does not make you an independent contractor.
A New York City resident or resident of the New Jersey suburbs who suspects their employer has misclassified them should make sure they understand their legal options.