New Jersey Independent Contractor Law and Healthcare Staffing
As healthcare facilities in New Jersey manage the challenges that come with nurse staffing, one important issue that’s often overlooked in the scramble for workers is employee misclassification. This can occur when a facility fills its nursing shifts with independent contractors (1099 workers), but then treats them like employees (W2 workers). While it may be tempting to hire 1099 workers who aren’t entitled to employee benefits, these cost savings come with a key tradeoff: Facilities lose the ability to direct and control how they work.
Given legal trends in New Jersey, this is becoming a bigger concern for healthcare facilities. In 2018, the state created a Misclassification Task Force bringing together representatives from several state agencies, including the Departments of Labor, Treasury, and Law and Public Safety, to improve the enforcement of New Jersey independent contractor law. Just a few years later, the New Jersey independent contractor misclassification act was passed. The 2021 law increased the penalties for misclassification and authorized the state to sue employers and issue stop-work orders.
Facilities that operate in New Jersey should have a clear understanding of how the law works to minimize the legal and financial exposure that comes with employee misclassification. Here’s a look at relevant New Jersey law, independent contractor misclassification, and what facilities can do to guard against it.
New Jersey Independent Contractor Law at a Glance
This chart highlights key laws that relate to employee misclassification and how the New Jersey independent contractor test is used to determine a worker’s status under the law.
| Statute(s) | New Jersey Statutes:
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| Key Definitions and Tests | Under Section 43:21-19(i)(6), a worker is presumed to be an employee unless each of the following elements can be established:
Note: The above test is also commonly referred to as the “ABC Test” and used in other states. |
| Enforcement | Under Section 34:1A-1.19, employers are required to post workplace notices informing workers about employee misclassification and the ABC test used to distinguish between employees and independent contractors in a workplace.Facilities that are found to have misclassified employees can face a range of penalties, including:
Under Section 34:19-13, New Jersey independent contractor law allows a misclassified employee who files a civil action against their employer to recover treble (triple) damages. |
The New Jersey Independent Contractor Test and Healthcare Staffing
With an estimated 10% to 30% of employers misclassifying at least one employee, it’s important for healthcare facilities to understand how the NJ ABC test might apply to their workforce. To start, the law presumes all workers to be employees unless all three of the elements can be established. In other words, unless you can show that 1099 nursing professionals in your facility meet all three parts of the New Jersey ABC test, independent contractor status would not apply.
When evaluating each part of the test, state agencies and courts will look at a variety of factors to determine whether it’s met under the law in NJ. Independent contractor agreements aren’t a get out of jail free card; a 1099 nurse may be a contractor on paper, but then be treated like an employee when performing their work. Here are some key questions to ask as you apply the test to your nursing workforce.
Direction and Control
- Do you give instructions and provide training to your 1099 nursing professionals?
- Do you set the work hours and schedule for your 1099 nursing professionals?
- Do you set the sequence of work during shifts for your 1099 nursing professionals?
- Are you required to supervise your 1099 nursing professionals based on their nursing licensure requirements?
Usual Course of Business
- Do your 1099 nursing professionals perform work different from work performed by your W2 nursing staff?
- Do your 1099 nursing professionals perform work inside of your usual places of business?
Independently Established Business
- Do your 1099 nursing professionals pay their own expenses?
- Do the 1099 nursing professionals that you hire primarily work for your facility?
- How long have your 1099 nursing professionals worked at your facility?
- Do your 1099 nursing professionals use their own equipment and supplies?
Alternatives to 1099 Nurse Staffing in New Jersey
Given the nature of the healthcare industry, and nursing care in particular, facilities may find it challenging to meet all three parts of the New Jersey independent contractor test, increasing their exposure to employee misclassification penalties. As facilities face the twin challenges of unprecedented nursing shortages and increasing demand for healthcare services, there is an alternative that can help them fill their shifts without increasing their legal and financial exposure — W2 nurse staffing.
Under this model, staffing companies hire their nursing professionals as W2 employees, providing them with the benefits and support they’re entitled to under the law, as well as the training, supervision, and direction they need to do their job. When your facility works with a W2 staffing partner, there is a separate employer of record available to support the nursing professionals that you need to fill your shifts and to maintain the records needed in the event your facility faces a state or federal misclassification audit. In other words, W2 nurse staffing gives you the flexible workforce you need without increasing your risk of employee misclassification.
Need to Fill Shifts, but Worried About Misclassification Lawsuits?
While New Jersey independent contractor law makes it harder to classify nursing professionals as independent contractors, you can still fill your shifts without adding employees to your payroll. Work with a W2 staffing partner so you can confidently fill your shifts with W2 nursing professionals today.
Legal Disclaimer: This article contains general legal information, but it is not intended to constitute professional legal advice for any particular situation and should not be relied on as professional legal advice. Any references to the law may not be current, as laws regularly change through updates in legislation, regulation, and case law at the federal and state level. Nothing in this article should be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed to practice in your jurisdiction.