The federal Fair Labor Standards Act of 1938, as amended,
29 U.S.C. §§ 201-219 (the "FLSA"), and its corresponding regulations, 29
C.F.R. § 510 et seq., require nearly all employers to pay
most employees not less than the federal minimum wage of $7.25 per hour for all
hours worked and overtime pay at 1½ times the regular rate of pay for all
hours worked in excess of 40 hours in a workweek.
Likewise, the New Jersey Wage and Hour Law, N.J.S.A. §§
34:11-56a - 34:11-56a30 (the "NJWHL"), and its implementing regulations,
N.J.A.C. § 12:56 et seq., mandate that most employees in New Jersey
be paid not less than the New Jersey minimum wage of $7.25 per hour for all
hours worked and overtime pay at 1½ times the employee's "regular hourly
wage" for all hours worked in excess of 40 hours in a workweek.
In contrast, neither federal law nor New Jersey law
compels companies to pay, to independent contractors, either the minimum wage or or overtime compensation at 1½ times
the contractor's regular rate. As a consequence, the factors used in
determining, under New Jersey law, whether a person is engaged as an employee
or as an independent contractor are highly important to businesses in the
The FLSA and the New Jersey Wage and Hour Law each state
that the term " 'Employ' " includes "to suffer" or "permit" to work. 29
U.S.C. § 203(g); N.J.S.A. § 34:11-56a1(f). The FLSA and
the New Jersey Wage and Hour Law each provide that the term " 'Employee' "
means or includes "any individual employed by an employer." 29 U.S.C.
§ 203(e)(1); N.J.S.A. § 34:11-56a1(g).
The New Jersey courts have not addressed the issues of
who is an employee and who is an independent contractor under the NJWHL. See
Chen v. Domino's Pizza, Inc., Docket No. 09-107, 2009 U.S. Dist. LEXIS
96362 (D.N.J. Oct. 16, 2007) (observing that "New Jersey has not addressed
the issue of who is an employer under the NJWHL").
However, the U.S. Court of Appeals for the Third Circuit
- the federal court of appeals whose precedents bind federal trial courts in,
among other states, New Jersey - utilizes a version of the 'economic reality'
test to determine if an employment relationship exists under the FLSA for
purposes of overtime pay and the minimum wage. The goal of this
test is to determine "whether, as a matter of economic reality, the workers at
issue 'are dependent upon the business to which they render service.' " Donovan
v. DialAmerica Marketing, Inc., 757 F.2d 1376, 1382 (3d Cir. 1985)
(citations omitted). If so, then the workers are employees; if not, then
the workers are independent contractors.
In applying the economic reality test to determine
whether an employment relationship exists under the FLSA, the Third Circuit
considers six factors:
See DialAmerica Marketing,
757 F.2d at 1382-1383.
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company complies with overtime pay and other wage and hour laws, or to retain a
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