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New Jersey Independent Contractors: What you need to know

Whether a worker is an “employee” or an “independent contractor” is critical when it comes to such important issues as pension eligibility, workers' compensation coverage, wage and hour law, and many other matters. In some situations, federal law will govern, but the question is most often resolved by looking to state law, particularly in areas such as unemployment tax liability, workers' compensation, and state wage and hour requirements.
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New Jersey law uses a three-part test to determine if a worker is an independent contractor and therefore ineligible to collect unemployment compensation benefits (NJ Rev. Stat. Sec. 43:21-19):
• The worker has been and will continue to be free from control or direction over the performance of the work, both under contract and in fact.
• The work is either outside the usual course of the employer's business, or the work is not performed at any of the employer's places of business.
• The worker is customarily engaged in an independently established trade, occupation, profession, or business.
This definition, although used in an unemployment setting, is generally helpful in giving employers an idea of the broader definition of independent contractor.
New Jersey workers' compensation law excludes from coverage persons who work as independent contractors or consultants (NJ Rev. Stat. Sec. 34:1B-125). In determining whether an individual is covered as an employee under the workers' compensation laws, the state will inquire, in addition to the factors that have already been mentioned, whether the job should be expected to carry its own accident burden. For example, someone working in the employer's ...

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