New Decision Expands the Boundary of Employment in New Jersey

A frequent issue that arises in New Jersey workers’ compensation cases is whether or not the petitioner is an employee or an independent contractor. In a recent case, decided October 26, 2018, The appeals panel in New Jersey answered this question in a case involving a cab dispatching service. After trial, the Workers’ Compensation Law Judge dismissed the claims of Julio Pendola against Milenio Express finding that Pendola was not Milenio’s employee despite the fact that the alleged employer had never paid the alleged employee. On appeal the Appellate Division reversed. Here’s why.

Facts From the Trial

The trial judge found that Pendola, a cab driver, was not employed by Milenio because:

• Pendola supplied his own car.
• Pendola supplied his own equipment, like the two way radio used to dispatch him.
• Pendola owned the “medallion” on the cab (the license to operate as a taxi);
• Pendola paid for his own gas, maintenance, and insurance on his car.
• The Petitioner was not paid by the company and in fact paid the company $150 per week for the dispatched fares.
• the Claimant testified that he never shared or remitted any portion of fares to the company; he kept 100% of all fares.

Against all of that, Pendola argued that he was an employee for the following reasons:

• Pendola testified that he had provided driving services exclusively to Milenio since 2003.
• Before he purchased his car, a Ford Crown Victoria, he consulted with Milenio who required he paint the car silver, affix the taxi company logo to it, along with the Company’s phone number.
• The company provided Pendola with business cards, receipts, and vouchers.
• Pendola also claimed he only picked up passengers from location when dispatched by the company.
• Pendola testified that the company required his to be well dressed, keep his car clean, and promptly pick up fares. The company punished drivers who failed to follow those basic requirements by not sending them dispatches for a few hours or the rest of the day.

The Appeals panel reversed, finding that Pendola was the employee of Milenio. Read more to find out why.

Examining the Trial Court’s Decision.

Applying the twelve-factor Pukowsky test, the framework the Court adopted “for assessing a worker’s employment status in the context of social legislation” in D’Annunzio v. Prudential Insurance Co. of America, 192 N.J. 110, 122-24, 927 A.2d 113 (2007), and “endorse[d] for purposes of determining whether the Compensation Act applies” in Estate of Kotsovska ex rel. Kotsovska v. Liebman, 221 N.J. 568, 576, 595, 116 A.3d 1 (2015), the compensation judge concluded Pendola was not an employee of Milenio. The judge found Classic “exercised very little control over the means and manner of [Pendola’s] performance.” He noted that although Pendola was required by the “Taxi Division to paint his vehicle silver and to place the company’s name and phone number on it, “he was otherwise left on his own to drive and pick up fares and unaccountable to Milenio.” The judge noted Pendola set his own schedule and was free to accept or reject the fares dispatched to him by Classic.

The judge also found the company did not supervise Pendola, that he was required to have an auto cab license and comply with the rules of the Taxi Division, that he furnished his own car and that, although he had been “associated with” Milenio for eleven years, it was “only to the extent of being a driver of an auto cab which was dispatched by Milenio/Classic.” The judge further found Pendola received no salary from the alleged employer but was required to pay a dispatching fee of $150 per week.

The Twelve-Factor Pukowsky Test

In the case Pukowsky v. Caruso, a sexual harassment action brought under the New Jersey Law Against Discrimination (LAD),the Appellate Division was asked to determine whether plaintiff Joanne Pukowsky was an employee or an independent contractor in her relationship with defendant Joseph Caruso while working as a skating coach and teacher at his roller skating rink, defendant Parkway Skating Center (Parkway). The court established the following twelve-part test for determining whether an employment relationship exists:

1. the employer’s right to control the means and manner of the worker’s performance;
2. the kind of occupation-supervised or unsupervised;
3. skill;
4. who furnishes the equipment and workplace;
5. the length of time in which the  individual has worked;
6. the method of payment;
7. the manner of termination of the work relationship;
8. whether there is annual leave;
9. whether the work is an integral part of the business of the “employer;”
10. whether the worker accrues retirement benefits;
11. whether the “employer” pays social security taxes; and
12. the intention of the parties.

The Appellate Panels’ Decision: Pendola Was an Employee

The appeals panel found that of the twelve Pukowsky factors, three were paramount: (1) employer control; (2) the worker’s economic dependence on the work relationship; and (3) the degree to which there has been a functional integration of the employer’s business with that of the person doing the work at issue.
The Appellate Court began by stating that “Here, of course, there was no dispute regarding Pendola’s economic dependence on [the company]. Pendola had been driving for [the company] for eleven years, and it was his sole source of income.” The Court found that Pendola was a “cog” in the company’s operation and therefore an integral part of the business of the employer. Thus finding that two of the twelve factors established by Pukowsky were satisfied, the appellate panel found that the claimant was an employee of the taxi dispatching service.

Lessons for the Defense.

There are a number of missed opportunities in the decision where the defense could have avoided the employment finding.

Missed Opportunity: Challenging the Basis for the Economic Dependence factor.

Based on the record before the Appellate Court, the only information about the claimant’s economic dependence on the employer – the first Pukowsky factor which the Court found in favor of the claimant – was not adequately challenged. The petitioner operated essentially a cash business and while he claimed he only took fares dispatched by radio, that was absolutely untested. The claimant also alleged that he made only $500-700 a week as a driver, which after his weekly remittance of $150 to the alleged employer, gas, maintenance, insurance etc., would have netted him perhaps $500 a week – a subsistence living unlikely to be to true.

There is no information in the record to suggest that the defense obtained the claimant’s tax filing records, which would have been useful in undermining his claims of economic dependence. Further, simple surveillance conducted or testimony to dispute that the drivers will, from time to time, take “street fares” or be hailed on the street would have undermined this factor.

Further, basic information such as how the Petitioner characterized himself in his tax and business registration filings does not appear to have been presented to the court.

Missed Opportunity: Disputing the Functional Integration factor.

The Appellate Panel found that “whether the work is an integral part of the business of the employer” was satisfied by the nature of the services provided by Pendola to Milenio. The court stated “[I]t cannot be seriously disputed that Pendola was one of the ‘cogs’ in Classic’s operation. His work as a driver willing to provide the rides Classic arranged was essential to the success of its business.” This opinions is supported in the decision by the employer’s statements in the record that while referring to the company as “a dispatching service, she also referred to it as a ‘transportation company’ and the riders as [it’s] customers, who [were] wooed with web ads, apps, keychains and pens with the company’s name and “nice vehicles, clean vehicles” and punctual, “proper attired drivers.” This testimony was relied on by the appeals panel in finding that the work the claimant performed (driving) was also the work of the alleged employer. This conclusion would have been harder to make if the defense had kept the employer’s self-description more narrow. By broadening the employer’s self-description to ‘transportation” the company may have needlessly opened the door for the Appellate Division to expand the scope of work to encompass nearly everything (and anything) done to further the interest of “transportation” in general.

Conclusion

Defending cases where the petitioner claims to be an employee despite a lengthy history (in this case, more than 11 years) of the claimant being treated as an independent contractor takes a dedicated, smart defense. Your defense counsel needs to be aggressive on these cases because, as is shown here, the courts are predisposed to find ways to make every person, regardless of their self-identification as an independent contractor, into an employee for workers’ compensation purposes.