Can an Indemnification Clause Be Enforced when the Company Misclassified a Contractor

[jk]

If and until you are determined to be an employee, it’s a discussion of hypotheticals.

Since it is illegal to classify a person as an IC if they do not meet the requirements to do so, the clause becomes void upon the determination of you being an employee.

[llworking]

It is illegal for them to require you to sign a contract waiving your right to proper classification under employment law. Therefore asking you to indemnify them renders the contract void. Its very simple. If you cannot accept that advice then do as Payroll guy said and hire an attorney.

[budwad]

If and until you are determined to be an employee, it’s a discussion of hypotheticals.

It is not a discussion of hypotheticals. Under Federal law and the laws of both NJ and NY, I have been an employee by definition of the laws and the tests used to determine the status from day one of my service. I knew it and so did the company. If I wanted the work, I had to go along with the determination. There are issues now arising that make the relationship uncertain and I'm just trying to understand the law and my options.

The NJ Supreme Court, as late as 2015, determined that the ABC test would be used to determine an employee status.

https://scholar.google.com/scholar_c...en&as_sdt=4,31

The "ABC" test presumes an individual is an employee unless the employer can make certain showings regarding the individual employed, including:

(A) 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 performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and

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

[N.J.S.A. 43:21-19(i)(6).]

"[T]he failure to satisfy any one of the three criteria results in an `employment' classification." Carpet Remnant Warehouse, Inc. v. N.J. Dep't of Labor, 125 N.J. 567, 581, 593 A.2d 1177 (1991).

(A): Each day, I am told what my job is for that day or week by my report and how many days to work that week based on demand.
(B): I preform the exact same service as other employees in my department and I do it in the company's only facility using the company equipment.
(C): I was retired and had shut down my business years before they approached me to take the position. I don't work for anyone else and this position is my only source of earned income.

I have no doubt that if and when the time comes, I will be found to be a misclassified employee.

It is illegal for them to require you to sign a contract waiving your right to proper classification under employment law. Therefore asking you to indemnify them renders the contract void.

Exactly how would you put that into an answer to a complaint, or a counterclaim?

[llworking]

I would put it exactly the way that I said it. I would ask for a dismissal of the case based on that. Assuming that they are actually stupid enough to sue you. I would be very surprised if they could even find an attorney willing to take the case.

[jk]

It is not a discussion of hypotheticals. Under Federal law and the laws of both NJ and NY, I have been an employee by definition of the laws and the tests used to determine the status from day one of my service. I knew it and so did the company. If I wanted the work, I had to go along with the determination. There are issues now arising that make the relationship uncertain and I'm just trying to understand the law and my options.

The NJ Supreme Court, as late as 2015, determined that the ABC test would be used to determine an employee status.

https://scholar.google.com/scholar_c...en&as_sdt=4,31



(A): Each day, I am told what my job is for that day or week by my report and how many days to work that week based on demand.
(B): I preform the exact same service as other employees in my department and I do it in the company's only facility using the company equipment.
(C): I was retired and had shut down my business years before they approached me to take the position. I don't work for anyone else and this position is my only source of earned income.

I have no doubt that if and when the time comes, I will be found to be a misclassified employee.



Exactly how would you put that into an answer to a complaint, or a counterclaim?

until your specific situation has been ruled that you are an employee unlawfully classified as an IC, it is hypothetical. Have you received such a determination yet?

(A): Each day, I am told what my job is for that day or week by my report and how many days to work that week based on demand.

and? Sounds like what an IC could be directed to do as well

a common misunderstanding is that an ic cannot be told to work only certain days or what they are allowed to do or not do at a given time. Contractors, more than employees actually, are told how many days they are needed to perform the contracted duties. Employees tend to be given busy work or simply paid for downtime while at work if there is no demand for their typical duties. Ic’s are needed only when the work they are contracted to perform is available so if there is no work avavailable for the contractor to perform, there is no need to allow them to work. Along with that, if you are contracted to perform certain work on demand as needed, yes they can demand you do that work at their scheduling. The biggest difference here is while an employee can call off from work and not be liable for the work not being done, an IC can be held liable for costs/losses/damages if they do not perform on demand, of course as long as that is part of their contract.




And before you bring it up: ic’s can be paid on an hourly basis or on a end result based contract

ICs work schedules can be limited by the contracting entity as well. A contracting entity allowing the IC to work only while the contracting entity is “open” is not unusual. As an example: while I am an employee of a company, the company I work for is an contractor. The entities that hire us can limit the times we are allowed to work to times they are normally open. They don’t have to allow us onto their premises while they would normally be closed even if that is when we would prefer to do the work. That does not change a contractor situation into an employee situation.

Oh, and I often do work that some of their employees normally do. It’s often they don’t have the manpower to do what I’m doing or it is simpler to have the specific work farmed out to a contractor.

and strangely enough, where I am working right now, when I need a tool I go to the customers tool crib and obtain whatever tools I need. My employer doesn’t provide any tools or equipment. In fact, if I were to bring in a tool, it becomes the property of the contracting entity.

Depending on what tools or equipment you use, it may actually be a situation where there is a legal requirement you use their tools or equipment.

In other words, it isn’t as simple as: I use their equipment so I am an employee.

c
(B): I preform the exact same service as other employees in my department and I do it in the company's only facility using the company equipment.

and? Those issues alone do not make you an employee and depending on the totality of facts can be totally acceptable as an IC. The fact you are doing it in the employing entities facilities is not necessarily relevant. All of the work I do is in the contracting entities facility yet I am never an employee of the contracting entity.

The bigger question is: could you use your own equipment if you chose to (if there is not a legal requirement the work performed must be done using their equipment). Could you do the work outside of their facility and if not, why not?

(C): I was retired and had shut down my business years before they approached me to take the position. I don't work for anyone else and this position is my only source of earned income.

completely irrelevant. The point I believe you are trying to suggest is you are not allowed to perform the same services for another entity (which is the rule used to determine status). You choosing to perform these services for only this entity is your choice (at least based on your statement). You’ve said nothing to suggest you are prohibited from performing those services for another entity.


There are some issues that lead to the argument you are an employee but the determination is not based solely on what you’ve posted. It is a totality of the facts that will lead to a determination of your status.

[budwad]

and? Sounds like what an IC could be directed to do as well

a common misunderstanding is that an ic cannot be told to work only certain days or what they are allowed to do or not do at a given time. Contractors, more than employees actually, are told how many days they are needed to perform the contracted duties. Employees tend to be given busy work or simply paid for downtime while at work if there is no demand for their typical duties. Ic’s are needed only when the work they are contracted to perform is available so if there is no work avavailable for the contractor to perform, there is no need to allow them to work. Along with that, if you are contracted to perform certain work on demand as needed, yes they can demand you do that work at their scheduling. The biggest difference here is while an employee can call off from work and not be liable for the work not being done, an IC can be held liable for costs/losses/damages if they do not perform on demand, of course as long as that is part of their contract..

I don't know where you come up with these theories of yours but it is contrarily to all the case law. An IC is hired to do the work that the company doesn't ordinarily do in house. If you have some cites that back up your contentions, please share them. In NJ and NY you are dead wrong.

And before you bring it up: ic’s can be paid on an hourly basis or on a end result based contract ..

But the contract has to define the project, the study, or the end results that the IC was hired to achieve. It is not doing the same work of the regular employees.

I

Cs work schedules can be limited by the contracting entity as well. A contracting entity allowing the IC to work only while the contracting entity is “open” is not unusual. As an example: while I am an employee of a company, the company I work for is an contractor. The entities that hire us can limit the times we are allowed to work to times they are normally open. They don’t have to allow us onto their premises while they would normally be closed even if that is when we would prefer to do the work. That does not change a contractor situation into an employee situation. ..

I guess you don't understand what the ABC test is and what the court has said about where the work is preformed and with whom owns the equipment. You have to look at the entirety of the contract. All elements of the ABC test have to be meet. If one is not meet, the person is an employee.

Oh, and I often do work that some of their employees normally do. It’s often they don’t have the manpower to do what I’m doing or it is simpler to have the specific work farmed out to a contractor. ..

Your personal feelings about your employment doesn't change the law. You may be in the same boat as I am.

and strangely enough, where I am working right now, when I need a tool I go to the customers tool crib and obtain whatever tools I need. My employer doesn’t provide any tools or equipment. In fact, if I were to bring in a tool, it becomes the property of the contracting entity. ..

So are you saying that you work as an IC for your company?

In other words, it isn’t as simple as: I use their equipment so I am an employee. ..

You really don't understand the what an IC is under the laws of the states. I suggest you study the law because an independent contractor is hired to work that the company does not do on a routine bases. An IC according to the law is someone that preforms a service that the company doesn't do in-house.

and? Those issues alone do not make you an employee and depending on the totality of facts can be totally acceptable as an IC. The fact you are doing it in the employing entities facilities is not necessarily relevant. All of the work I do is in the contracting entities facility yet I am never an employee of the contracting entity. ..

Then you don't understand the law. I suggest you that you will some day find yourself in my situation.

The bigger question is: could you use your own equipment if you chose to (if there is not a legal requirement the work performed must be done using their equipment). Could you do the work outside of their facility and if not, why not? ..

An IC has a task to do. It is not opened ended. The contract is to preform a certain outcome. Like built this machine for us or create this software for us or do this analysis for us. The contract is supposed to say what the project is. To just show up for work each day and do the same tasks that the employees are doing is not what an IC is hired to do under the law. They are hired to do something that the company doesn't do.
.[/QUOTE]

completely irrelevant. The point I believe you are trying to suggest is you are not allowed to perform the same services for another entity (which is the rule used to determine status). You choosing to perform these services for only this entity is your choice (at least based on your statement). You’ve said nothing to suggest you are prohibited from performing those services for another entity. .

The point that I make under the (C) part of the test is that I don't have a viable business anymore to make earned income should I not have my current situation. I don't have a business that does what I do for the company for other businesses. So if you read the case I linked to, you would understand. I only work for this company.

There are some issues that lead to the argument you are an employee but the determination is not based solely on what you’ve posted. It is a totality of the facts that will lead to a determination of your status.

I have read every case in NJ, NY and the District court that I could find. I am very confident that I am a misclassified employee.

[bcr229]

Under Federal law and the laws of both NJ and NY, I have been an employee by definition of the laws and the tests used to determine the status from day one of my service. I knew it and so did the company. If I wanted the work, I had to go along with the determination. There are issues now arising that make the relationship uncertain and I'm just trying to understand the law and my options.

So what options are you considering?

[budwad]

What options would any employee have if they lost their job? Perhaps unemployment benefits? Do I need to spell out what would happen if I applied for benefits?

[jk]

What options would any employee have if they lost their job? Perhaps unemployment benefits? Do I need to spell out what would happen if I applied for benefits?

Um, rejection since they didn’t pay anything in maybe?

I’m guessing you haven’t read all New Jersey case law onnthe subject. Here is an article supporting my position on test c of the abc test and proving your position flat out wrong

https://www.retaillaborandemployment...dent-business/


here is an excerpt specifically applicable to you

Another noteworthy observation from Garden State Fireworks is that the panel found, without directly addressing the issue, that pyrotechnicians who were retirees could satisfy part C. Plainly, a retiree, by definition, is not engaged in an “an independently established trade, occupation, profession or business.” Nevertheless, if the panel would have addressed the issue, it may have concluded, based on Carpet Remnant, that the retirees were not employees because, being retired from employment, they were not economically dependent on the fireworks company and, thus, would not join the ranks of the unemployed upon termination of the challenged relationship.

[bcr229]

What options would any employee have if they lost their job? Perhaps unemployment benefits? Do I need to spell out what would happen if I applied for benefits?

This is the first that you've brought up the potential for your contract being terminated. Up until now everything you asked was with respect to a lawsuit being filed and the enforcement of the indemnification clause, which I assumed would include the termination of your contract but I don't like to make assumptions.

If you think that losing your job/contract is imminent then I see no reason not to file the SS-8 now with the IRS to request a determination of whether you've been misclassified, rather than waiting until you get terminated. I understand that those requests can take 6+ months to be processed.