Supreme Court of New Jersey

The Supreme Court of New Jersey recently addressed the question of whether an agreement between a brokerage company and a salesperson identifying that salesperson as an independent contractor excluded the salesperson from the state Wage Payment Law. The New Jersey Wage Payment Law governs compensation paid to employees but does not apply to independent contractors. The plaintiff alleged that the brokerage company had misclassified him as an independent contractor and thus had violated the Wage Payment Law by unlawfully deducting fees and expenses from their commissions. The lower courts held for the plaintiff, ordering that although the parties had entered into an agreement which specifically identified the plaintiff as an independent contractor, the legal standard to determine if an individual was an employee or an independent contractor was the “ABC” test. The defendant brokerage company appealed the decision. During the appeal process of the case, the New Jersey Legislature made several amendments to its Real Estate License Act, including authorizing brokerage companies and their salespersons to enter independent contractor relationships and for said amendment to be applied retroactively. The Supreme Court of New Jersey ultimately found that the salesperson, who had a written independent contractor agreement with his brokerage company, must be treated as an independent contractor and was not subject to the ABC test and was not covered under the Wage Payment Law.

Takeaways:

• Written agreements between the sponsoring broker and licensees should specifically state the relationship (i.e. independent contractor or employee).
• Sponsoring brokers should still be aware of the various tests that exist to determine whether a licensee should be classified as an employee or an independent contractor.