By Frank Agostino, Esq. & Eugene Kirman, Agostino & Associates, P.C.

Overview

The U.S. Department of Labor recently awarded a total of $10.2 million to 19 states for the purpose of improving worker classification compliance. New Jersey received the third-largest total award of $838,621. This sum included the second-largest bonus, $496,399, for its performance in identifying instances of worker misclassification.1 In spite of such accolades, New Jersey remains the state with the third-highest rate of improper unemployment insurance payments in the nation.2 If your business uses independent contractors, be prepared for new, heightened scrutiny by the New Jersey Department of Labor (“DOL”).

The consequences of misclassifying employees as independent contractors include penalties, interest, and criminal liability—in addition to paying back the required contributions. The New Jersey and federal statutes involved cover unemployment, workers’ compensation insurance, employment taxes, the Affordable Care Act, employment discrimination, Federal anti- discrimination statutes,3 and other issues.4

The purpose of this article is to discuss worker misclassification audits for businesses and unemployment benefit claims processes for workers in the State of New Jersey.

Independent Contractor versus Employee

Responsibility for Unemployment and Disability Benefits

For unemployment insurance purposes, an employer is a legal entity that is required by law to furnish unemployment insurance coverage to one or more individuals. An employer can be a sole-proprietor, a partnership, a limited liability company (LLC or LLP), a corporation, or any other entity for which a worker performs services. Every New Jersey employer must file Form NJ- 927, Employer’s Quarterly Report and Form WR-30, Report of Wages Paid, by the 30th day after the end of each quarter. The employer must also pay amounts due on Form NJ-927, which, among other items, include employment insurance and disability insurance. The employer must also fill out—and provide to the departing employee—Form BC-10, Instructions for Claiming Unemployment Benefits. If the employer rehires any employee, the employer must fill out Form BC-6, Notice of Failure to Apply For, or to Accept, Suitable Work.5

In New Jersey, an employee is defined as someone who performs a “service . . . for remuneration under any contract of hire, written or oral, express or implied.”6 Thus, according to the New Jersey legislature, every service provider is presumed an employee unless there is a statutory exception or it is proven otherwise.7 The exceptions include church ministers, elected officials, members of the judiciary, and National Guard servicemen.8 Other people not considered employees—provided they are exempt by FUTA—include employees of the state and federal governments and their instrumentalities, certain individuals paid on commission-only basis such as mutual fund brokers, home-to-home sales- persons, and individuals performing services for spouses, parents (if the child per- forming the services is under 18), and children.9

The presumption may be rebutted upon satisfaction of the “ABC test,” which sets forth the following:

Services performed by an individual for remuneration shall be deemed to be employment subject to this chapter unless and until it is shown to the satisfaction of the division that:

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 such service is per- formed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and

Such individual is customarily engaged in an independently established trade, occupation, profession or business.10

The statute is constructed liberally by both the DOL and the Courts, “permitting a statutory employer-employee relationship to be found even though that relationship may not satisfy common-law principles.”11 In contrast to an employee, an independent contractor is one who has control over how the work is performed, who provides services outside the usual course of business, and who operates an independent business. Courts have held that the independent business prong sets a high benchmark. It “calls for an enterprise that exists and can continue to exist independently of and apart from the particular service relationship. The enterprise must be one that is stable and lasting—one that will survive the termination of the relationship.”12

For the independent business prong, the DOL and Courts take into consideration the following additional factors: (1) strength and duration of business; (2) volume of business and number of customers; (3) resources, such as equipment, and compensation, received from the company in question compared to others; (4) corporate or trade name; (5) reporting on Schedule C for federal tax purposes; (6) insurance for the business; (7) business cards and stationery; and (8) payment method.13 Thus, if the employer can show that the independent contractor is a business separate and apart from the employer, with income from other clients, business expenses, and a separate business identity, the individual in question will not be considered an employee.

For example, a paper-deliverer was designated as an “independent service contractor” in his contract with a newspaper company and was paid based on the number of newspapers delivered, rather than a fixed salary.14 He was required to deliver newspapers on time in good condition. He was free to use sub-contractors and had to use his own vehicles.15 The parties agreed that the service was performed outside all the places or usual course of business (prong B was satisfied). The Court determined that the individual was free from control (prong A was satisfied), but did not maintain an independent business (prong C) and therefore was an employee.16 He did not have a history of newspaper delivery prior to that job and became unemployed upon getting fired from that job, so his business was not “established independently of the employer.”17

Workers’ Compensation

New Jersey’s no-fault workers’ compensation insurance pays for medical bills, replaces wages, and compensates for permanent disability. Employees suffering job- related injuries or illnesses are covered under the insurance. New Jersey law requires that all New Jersey employers not covered by federal programs have workers’ compensation coverage or be approved for self-insurance. Out-of-state employers doing work in New Jersey or entering employment contracts in New Jersey may also need workers’ compensation coverage. The insurers and self-insured employers must submit quarterly reports.18 The Division of Workers’ Compensation administers the New Jersey Workers’ Compensation Act.

New Jersey Workers’ Compensation Act, N.J.S.A. § 34:15-36, defines “employees” as:

[A]ll natural persons, including officers of corporations, who per- form service for an employer for financial consideration, exclusive of . . . casual employments, which shall be defined, if in connection with the employer’s business, as employment the occasion of which arises by chance or is purely accidental; or if not in connection with any business of the employer, as employment not regular, periodic or recurring[.]

New Jersey courts have developed two tests to determine if an individual is an “employee” within the meaning of N.J.S.A. 34:15-36 or an independent contractor: the “control test” and the “relative nature of the work test.” Both tests focus on whether the alleged independent contractor is a separate enterprise as opposed to an integral part of the employer’s regular business.

Specifically, the “con?trol test” focuses on the?control exercised by the?employer over the?means of completing the?work. By contrast, the?relative nature of the work test focuses on whether the allegedly misclassified worker is economically dependent on the employer (i.e., if there is a functional integration of the parties’ respective businesses). The courts look at the totality of the circumstances.19

In a recent unpublished case, a hair- dresser cut hair once a week at Brandywine Senior Care Center, provided similar services once a week at a different nursing home, and also washed hair once a week at another unrelated business.20 The hairdresser used her own scissors, hair dye, permanent waves, and sanitizers, but she used Brandywine’s facilities, hairdryers, chairs, supply cabinet, and chairs.21 Brandywine also set the fees, paid the hairdresser after taking a 15% cut of her earnings, and reserved the right to terminate her.22

Brandywine scheduled the appointments, and the hairdresser worked from 9:30 until the last scheduled customer.23 The court determined that control factors were present: the hairdresser did not set her own hours or schedule the appointments, was paid by Brandywine and not customers, and Brandywine could terminate her.24 Substantial dependence was also present, as the hairdresser depended on Brandywine for customers and essential hardware, did not set her own hours, and could be terminated at will.25 The hairdresser was deemed Brandywine’s employee.26

How Cases Are Selected for Audit

Because employers do not remit employment taxes, unemployment insurance, or workers’ compensation for independent contractors, the business will likely be audited when an independent contractor files a claim for unemployment benefits, disability, or workers’ compensation. The DOL also selects businesses for audit at random, by targeting particular industries and by following up on prior violators. New Jersey also encourages individuals and organizations to report: (a) allegations of failure on the part of any employer operating in the State of New Jersey to provide for the protection of its workers by maintaining workers’ compensation insurance or obtaining authorization to self-insure and (b) employers who don’t withhold payroll taxes.27 The DOL may also get a lead from other taxing authorities including the Internal Revenue Service (“IRS”).28

The Statute requires the DOL to cooperate with the U.S. Department of Labor and encourages it to work with other U.S. agencies.29 Furthermore, the DOL and the IRS have a Memorandum of Understanding (“MOU”), where they have agreed to exchange information and collaborate to reduce incidents of employee misclassification.30 The purpose of the MOU is to facilitate proper employee classification, reduce fraudulent filings, and uncover avoidance schemes.31 However, in our experience, when the New Jersey liability is satisfied, there is no referral to the IRS.

Department of Labor Audits—Unemployment and Disability

Recordkeeping Requirement

At the beginning of the audit, the auditor will request books and records from the employer, including payroll records, cash disbursement records, the petty cash book, the general ledger, NJ Quarterly Contribution Reports, NJ Employer Report of Wages Paid, Federal Income Tax returns, Federal Employment Tax Returns, Federal Forms W-3 Transmittal with Forms W-2, Federal Forms 1096 Transmittal with Forms 1099, and workers’ compensation insurance. Employers must keep the records for the current year and four preceding years.32 In addition, the auditor will request additional information concerning the independent contractor, such as invoices, advertisements, business telephone listings, contracts, business licenses, business cards and stationery, agreements, and business addresses.

To prove to the auditor that the independent contractor is an independent business, the business should consider providing the auditor with a declaration by the independent contractor explaining how he established and operates his business, as well as a copy of the independent contractor’s Schedule C or corporate income tax returns. These documents will demonstrate to the auditor that the independent contractor is an established independent business and has income sources for the year other than the audited company.

Because the auditor will request the books and records of a business, it is best to be prepared: collect and organize the books and records for the auditor as soon as possible. If the business does not provide the required documentation, the DOL can subpoena the documents. Moreover, an employer is liable for up to $200 and is subject to an imprisonment of up to sixty days for each day of failing “to attend and testify or to answer any lawful inquiry or to pro- duce books, papers, correspondence, memoranda, and other records, if it is in his power so to do.”33 Claiming protection against self-incrimination is not an excuse from attending or producing records, but evidence so obtained may not be used against the person.34

During the audit, the auditor will also request to see a copy of the workers’ compensation insurance. As explained above, all New Jersey employers are responsible for making sure that they have adequate and lawful workers’ compensation coverage for all employees. If the worker is found to be an employee, the business will be required to pay insurance on behalf of the worker.

Administrative Appeals

At the conclusion of the audit, the auditor will issue a “Summary Audit Schedule Report” (FS-325). If the employer disagrees with the report with respect to the coverage, status, liability for contributions, reporting, refunds, or rates of contribution, the employer should complete and file the “Request for Hearing” within 30 days of the date on the report.35

All completed requests are returned to the Chief Auditor within the required 30 days.36 All “Request for Hearing” forms will be reviewed in the Chief Auditor’s Office to determine if the reason for the dispute could be resolved at a conference with a representative of the Chief Auditor.37 If the review of the form indicates that an informal conference is necessary, then a representative of the Chief Auditor will be assigned to con- tact the employer to schedule the informal conference.38 If a review of the form indicates that an informal conference will not be productive, then the employer will be notified that the case will be transmitted to the Office of Administrative Law.39 Many practitioners assert that interest and penal- ties are negotiable at the hearing. Likewise, if the informal conference proves unsuccessful, the case will be forwarded to the Office of Administrative Law.40

Within 45 days (or, when good cause is shown, 90 days) of the administrative judge’s recommended report, the Commissioner “shall adopt, reject or modify” it, and if he does nothing, the report “shall be deemed adopt- ed.”41

Appeal to the Courts

The employer may appeal the final decision within 45 days to the Appellate Division of the New Jersey Superior Court.42 On appeal, the court looks at the administrative agency’s decision. While the court is not bound by the administrative law judge’s decision, it is free to use it to evaluate the soundness of the DOL’s findings. The Appellate Division will not overturn the DOL’s decision, unless it is “arbitrary, capricious or unreasonable,” “lack[s] fair support in the evidence,” or “violate[s] legislative policies expressed or implicit in the [act governing DOL].”43

Audits of Workers’ Compensation

Responsibility for Workers’ Compensation

The New Jersey Division of Workers’ Compensation is responsible for the administration of the New Jersey Workers’ Compensation Act. The Compensation Rating and Inspection Bureau of the Department of Banking and Insurance establishes regulations and sets rates for insurance policies. Proof of workers’ compensation insurance must be included in the employer company’s annual report44 and must be presented to the Commissioner of Banking and Insurance on demand.45 The employer must also conspicuously post notices of insurance in the place of business.46 To reduce their workers’ compensation compliance costs following an injury, employers are encouraged to establish return-to-work programs with lighter loads, communicate before the injury, and get actively involved after the injury— including communicating, ensuring the employee promptly seeks medical attention, and exercising the right to select the employee’s health provider.47

Insurer Audits

The insurer may inspect ledgers, registers, journals, vouchers, tax reports, con- tracts, programs for storing and retrieving data payroll, and disbursement records. An audit normally takes place at the end of a policy term. After the inspection, the insurer may attempt to assess additional premiums—if, for example, the insurer decides that certain employees were improperly classified as independent contractors. The insurer may not, however, assess such additional premiums if the independent con- tractor classification was proper, even if the workers in question were not qualified to obtain workers’ compensation independently.48 An employer disagreeing with the assessment should first attempt to resolve the dispute with the insurer. If there is still a dispute, to avoid insurance cancellation the employer disagreeing with the assessment may pay under protest and later seek reimbursement.

Administrative Appeals

If an employer disagrees with the insurer on an issue specifically covered by the New Jersey Workers’ Compensation and Employers’ Liability Insurance Manual, such as the amount of payroll or the classification of the business as a furniture store instead of a restaurant, the employer may appeal to the New Jersey Compensation Rating and Inspection Bureau. According to the Bureau’s representative, such disputes are always resolved within the Bureau and there is never a need to take them further. The insurer may not change a classification with- out an approval from the Bureau, but may change the total payroll amount on its own.

In order to appeal the determination of insurance premiums to the Bureau, the employer must present the appeal prior to the effective cancellation of coverage date or commencement of collection or other legal proceedings by the insurer and must have paid all the undisputed premiums.49 The dispute must be submitted in writing to the Director of the Division that made the original determination, and must identify the employer, producer, insurer, policy term and number. It need also contain “sufficient detail,” including premium calculations.50 After that, an informal conference involving both parties and the Division’s representative may be scheduled, and a written summary of the conclusions and agreements provided to the participants.51 Further appeals may be made first to the Rating Bureau’s Executive Director and then to the Governing Committee.52

Appeals to the Courts

The New Jersey Compensation Rating and Inspection Bureau does not decide issues such as independent contractor versus employee classification. On such claims, the employer may file a claim in the Superior Court, Law Division and later appeal that decision to the Appellate Division, according to the standard procedures. The insurer may also file a claim for issues such as unpaid premiums.

Cross-Matching by the Office of Special Compensation Funds

The Office of Special Compensation Funds regularly compares its data with the Department of Banking and Insurance’s Compensation Rating and Inspection Bureau to identify uninsured employers. A suspect employer is sent a letter and a cross- match response form. If the employer’s response is unsatisfactory, penalties may be assessed against the employer.

Consequences of a New Jersey Determination of Misclassification

Employers May Be Liable for Penalties

Unemployment and disability insurance rates depend on the employer’s experience. For the first three years, “new employer” rates apply.53 Depending on a number of factors, these premiums then may go up or down.

If premiums are paid late, a 1.25% per month interest is added to the total.54 On top of additional principal and interest, penalties may apply. For failing to timely file NJ-927, an employer is liable for the lesser of $10 per day or 25% of contributions due. For a late or incomplete WR-30 the penalties range from $5 to $25 per form.

An employer or employer’s officer or agent who knowingly makes a false statement, or fails to disclose a material fact, to reduce the payment of unemployment benefits or to reduce the contribution amount, “or who willfully fails or refuses to furnish any reports required . . . or to produce or permit the inspection or copying of records” is liable for the greater of a $100 fine or 25% of the amount fraudulently withheld, per day.55

An employer or responsible person filing a fraudulent report is liable for a fine up to $1,000 and may be imprisoned up to ninety days.56 A fine of up to $1,000 per violation may be imposed for a knowingly- made false statement, failure to disclose a material fact, attempt to defraud, or a willful violation of a provision of the act, rule, or regulation promulgated under it.57

The Construction Industry Independent Contractor Act makes it a second degree crime to knowingly fail to properly classify construction workers if the con- tract amount exceeds $75,000.58 Employers may be additionally penalized for violating the provisions of the Workers’ Compensation Act.59 The insurance premiums, which must be paid to stay current on the insurance, depend on payroll size, type of work, experience of the employer, and other factors. For example, a machine shop may be charged premiums of over 4% of the payroll, while a clerical department may be charged less than 0.3%.60

Potential for IRS Audit

Under the MOU between the IRS and New Jersey mentioned above, the IRS refers worker misclassification cases to New Jersey. Similarly, New Jersey refers worker misclassifications to the IRS. Note, however, that mere referral to the IRS does not guarantee that the IRS will adopt the DOL’s employee classification. The IRS has a separate test from New Jersey’s ABC test for determining whether a worker is an employee.

Common law principles are applied to specific facts and circumstances to deter- mine whether a worker is an employee or independent contractor.61 Relevant factors include: (1) the degree of control exercised by the principal; (2) which party invests in the work facilities used by the worker; (3) the opportunity of the individual for profit or loss; (4) whether the principal can dis- charge the individual; (5) whether the work is part of the principal’s regular business; (6) the permanency of the relationship; (7) whether the worker is paid by the job or by time; (8) the relationship the parties believed they were creating, and; (9) the provision of employee benefits.62

An upcoming edition of this newsletter will address worker misclassification issues under Federal law and the private rights of action available to misclassified workers under 26 U.S.C. § 7434.

Strategies for Minimizing Exposure

Hire Incorporated Independent Contractors or Partnerships

Our experience suggests that the single most effective tactic an employer can use to minimize exposure is to only hire independent contractors who have incorporated their own businesses. Stated simply, the employing entity should enter into an independent contractor agreement with C Corporations or partnerships, but not sole proprietors or single-member LLCs. Accordingly, the contracting entity will pay the corporation, which in turn will pay its employees. If possible, the contract should require that the service corporation pay state and federal payroll taxes, provide any employment benefits required by New Jersey law (i.e., paid vacation), and purchase workers’ compensation insurance. Because the IRS audit manual states that an incorporated worker will usually be treated as an employee of the worker’s corporation and not of the hiring firm— unless the corporation is a sham—New Jersey auditors respect the separate existence of the corporation.

Execute an Appropriate Contractor Agreement

The agreement with an independent contractor should:

Require the contractor to submit invoices. The payment due date must be the same as for your other outside vendors.
Require the contractor to pay travel or other business expenses directly.
Require the contractor to treat the ?relationship with the company as an independent contractor relationship for all purposes of the Internal Revenue Code and applicable state tax laws.
Require the contractor to report on his federal and state income tax returns all income received by him pursuant to the contract as income received from a trade or business subject to self-employment tax.
Require the contractor to pay all federal self-employment taxes shown on his federal income tax return that are attributable to the contract.
Require the contractor, upon request of the company, to complete and sign IRS Form 4669, Statement of Payments Received.
Require the contactor to indemnify and hold harmless the company for all federal and state withholding and employment taxes that the company pays with respect to the agreement.

Claiming Benefits

Qualifying for Benefits in New Jersey

Unemployment Benefits?For an employee to be eligible for benefits, the employee must have been working for at least 20 weeks or earned 1,000 times the state minimum wage rounded up (i.e., $8,300 in 2014).63 The employee must file a claim, comply with reporting requirements, be able to work and be available for work, actively search for work, and participate in reemployment services if requested to do so.64 The employee must also wait for a week.65 In addition, the employee must not be subject to any of the disqualification or ineligibility conditions.66

What if someone works just a little to make ends meet? Is this type of worker still “available for work”? The analysis is case- by-case, and the factors include:

(1) the income received from the new business measured against both the prior salary received and the salary sought in the search for work;

(2) the accoutrements of a permanent business established by the claimant;

(3) the hours dedicated to the new business versus the efforts expended to seek outside employment; and

(4) the continued amenability of the claimant to a broad spectrum of appropriate employment.67?For example, an attorney who does a few real estate closings, or writes a couple of wills, or represents defendants in the evening but spends the day looking for work, may qualify.68 The details are important. In another example, an attorney who incorporated his own law office around the time he was laid off, leased commercial office space a month later, made regular calls between 8:30 AM and 5 PM, opened 150 cases and grossed $32,855 in about six months, did not qualify for unemployment benefits.69

State Disability Benefits?Temporary disability benefits are for individuals who suffer non-work-related injuries or whose work-related claim is denied. To qualify for New Jersey disability benefits, the claimant must satisfy work requirements similar to unemployment benefits.70 Likewise, a one-week waiting period applies, except for a family leave immediately following a personal leave.71 Personal disability benefits may not extend for more than 26 weeks per disability.72 In addition, the individual must be under care of one of a listed professional,73 the injury may not be self-inflicted, and the individual may not work for compensation or be dis- charged for gross misconduct in connection with a crime.74

Family disability benefits may not extend for more than six weeks per disability or in any 12-month period.75 There are two qualifying categories of cases: an ill family member and a recently born or adopted child.

To qualify under the first category, the family member for whom the covered individual cares must suffer from a serious health condition.76 The following certification must be obtained from a health care provider:

(1) The date, if known, on which the serious health condition commenced;

(2) The probable duration of the condition;

(3) The medical facts within the knowledge of the provider of the certification regarding the condition;

(4) A statement that the serious health condition warrants the participation of the covered individual in providing health care, as provided in the “Family Leave Act,” P.L.1989, c. 261 (C.34:11B-1 et seq.) and regulations adopted pursuant to that act;

(5) An estimate of the amount of time that the covered individual is needed for participation in the care of the family member;

(6) If the leave is intermittent, a statement of the medical necessity for the intermittent leave and the expected duration of the intermittent leave; and

(7) If the leave is intermittent and for planned medical treatment, the dates of the treatment.77?In addition, the claimant must be ready to submit the affected family member to an examination by a state-designated health care provider.78

To qualify under the second family dis- ability category, the leave must commence within a year after a child’s birth or adoption.79 In addition, the claimant must notify the employer (or the State, in the case of an individual receiving unemployment benefits) of the leave within 30 days of the leave.80 Failing to do so will result in a loss of two weeks’ worth of family disability benefits, unless the leave is unforeseeable.81

Workers’ Compensation?For an injured employee to qualify for workers’ compensation, the injury must be accidental, occur during the course of employment, and be negligently caused by the employer.82 The employee must not have been willfully negligent. Note that the employee’s willful negligence is a jury question.83 The employee’s assumption of risk and fellow employees’ negligence are irrelevant, and the liability may not be waived by contract.84

Appealing Benefit Eligibility

Unemployment and Disability Benefits

After an individual files a claim for unemployment benefits (which must be submitted within a year), the DOL issues a Notice of Determination to both the individual and the employer which states whether the individual is entitled to receive benefits.85 If a worker has been classified as an independent contractor as opposed to an employee, his or her claim for unemployment benefits will initially be denied.

If the individual is denied unemployment benefits, the individual can appeal the Notice of Determination to the Appeal Tribunal (the “Tribunal”). Both the individual and the employer may file an appeal from the determination of entitlement with- in ten days of the mailing of the Notice of Determination or seven days from its delivery.86 A worker who is initially improperly denied benefits may have to wait for several months to get them after appeals.

The hearing is conducted by an appeals examiner. The Tribunal takes testimony under oath or affirmation. Witnesses may be presented by the employer, the employee, or the government, and subpoenas may be issued. Hearings may be postponed for good and substantial reasons if an appropriate request is received at least three days in advance.

The Tribunal, on its own initiative or at the request of one of the parties, may substitute a phone conference for an in-person meeting. If a party is represented by an attorney, the attorney must submit Form BR-20 to the Board of Review for fee approval.

The Tribunal’s decision may be appealed to the Board of Review in writing87 or in the local unemployment claims office within twenty days of the mailing or notification date of the decision. Most cases are decided on the record without an additional hearing.

Within forty-five days of the mailing of the decision of the Board of Review, a party may further appeal it to the Superior Court, Appellate Division.88 The Board of Review may remand a case back to the Tribunal for additional fact-finding. The Appellate Division may, likewise, remand a case back to the Board of Review.

Individuals falsely claiming benefits may be assessed a fine equal to 25% of the amount fraudulently obtained with respect to both state and federal unemployment programs.89

Workers’ Compensation

If the employer (or carrier) and the employee fail to reach an agreement regarding the employee’s entitlement to workers’ compensation within 21 days of the injury taking place, the Division of Workers’ Compensation (the “Division”) will attempt to facilitate a settlement.90 When an injured employee fails to file a claim, the Division may open an inquiry on its own motion and, with the employee’s consent, file a claim on the employee’s behalf.91 There are two types of proceedings: formal claims92 and informal hearings.93

An informal hearing gives the parties an opportunity to settle. It is speedier than a formal hearing.94 The deadline to file is the same as for the formal claim.95 The informal hearing does not stop the running of the statute of limitations to file a formal claim,96 and the resolution is non-binding. Any party of interest, such as the employer, employee, or insurance carrier, may file the claim.97 Form WC-66 is available for informal filings, but a different form may be used.98 WC-66 does not ask for any substantive information, except for injury type and date.

The formal claim, in contrast, must be filed on Form WC-365 and signed under 99?oath. Form WC-365 requires more information than WC-66, including a more detailed description of the injury, the amount of wages, date reported, and dates when work stopped and resumed. The deadline to file a formal claim petition is two years after the injury.100 Within five days of the petition being filed, a copy is for- warded to the employer. The employer must answer within 30 days.101 Within 20 days of the answer being filed, or at the expiration of time for filing an answer, the Division will select a time and location102 for hearing the petition.103 In most cases, the selection will take four to six weeks from the filing of the petition.104 The parties must be given ten days’ or more notice of the hearing.105 The hearing “shall not be bound by the rules of evidence.”106 There are no filing fees.107 A winning party may be awarded attorneys’ and witness costs up to 20% of the judgment.108

The Division’s decision in a formal hearing may be appealed to the Appellate Division of the Superior Court.109 When an employer fails to comply with the decision of the Appellate Division, the employee may seek remedy in the Law Division of the Superior Court.110 When the Supreme Court reverses the Appellate Division’s denial of compensation in a proceeding involving worker’s compensation, the fees for services in both the Supreme Court and the Appellate Division are determined by the Supreme Court.111

The Uninsured Employer’s Fund handles cases involving uninsured employers. The Fund may pay reasonable medical expenses and temporary disability compensation, but not death benefits, or any benefits not in the order of the Compensation Judge.112 The Compensation Judge’s judgment or the Director’s order is filed with the Clerk of the Superior Court and may later be modified.113 The employee may sue the employer for the shortfall after deducting any payments received from the Uninsured Employer’s Fund.114

New Jersey Worker Misclassification Cases in the News

Recent cases demonstrate that no violator is safe. A mother and daughter involved in a Newark-based $2 million fraud scheme were recently each sentenced to 15 years in prison.115 A Livingston-based accountant pleaded guilty to falsely claiming $700,000 in unemployment benefits, in the names of his clients and others.116 Even DOL employees are not immune, as one of them was recently charged with redirecting unemployment benefits into her own account.117

Conclusion

Whether or not they have been classified as independent contractors, unemployed and injured workers are aggressively pursuing the wages, benefits, and legal rights available to “employees” working in New Jersey. As a result, New Jersey employers should expect increased scrutiny of worker classification decisions. Readers with questions about the prosecution or defense of misclassification- based claims should feel free to contact the attorneys at Agostino & Associates.

The Consequences of Misclassifying Employees as Independent Contractors in New Jersey

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