A Capehart Scatchard Blog

Independent Contractor – Kertesz v. Korsh

By on July 7, 2008 in Key Defenses with 0 Comments

To establish that an employee is an independent contractor the employer must consider the two tests used in New Jersey. The case of Kertesz v. Korsh, 296 N.J. Super. 146 (App. Div. 1996) provides an illustration. In this case the petitioner, Michael Kertesz, was a skilled contractor who did sheet rocking for 30 years. He had his own business for which he had insurance in his name, not a corporate name. As such he himself was not covered for injuries. Sometimes he would hire himself out to others when work was slow. He did this about three or four times a month for respondent Korsh, a home builder.

Petitioner was told to bring his tools and his truck to the job at which he was injured. He considered a coworker, Robert Pastor, who worked for respondent, to be his foreman. Mr. Pastor picked up the petitioner on the day of the injury. Respondent provided the sheetrock, nails and supplies, as well as the scaffolding. There were five people installing sheetrock at the job site. Petitioner fell while working and was injured. The workers’ compensation judge found that the petitioner was not an employee, but the Appellate Division reversed for the petitioner.

The first point addressed was the issue of casual employment. The court ruled that petitioner was not a casual employee because his hiring was not accidental or by chance. He was hired three or four times each month.

Next the court reviewed the two-part test for independent contractor status:

a. The Control Test:  This test refers to the “right to direct the manner in which the business or work shall be done, as well as the results to be accomplished.” Brower v. Rossmy, 63 N.J. Super. 395, 404-405 (App. Div. 1960), certif. denied, 34 N.J. 65 (1961). Although this petitioner clearly did not need instruction, the court remarked that respondent, through Mr. Pastor, had the right to control the petitioner’s work.

The right of control test used to be the more prevalent test in New Jersey but over the past few decades it has fallen out of favor and is less used by courts.

b. The Relative Nature of Work Test: The court noted that New Jersey courts place greater reliance on this test than the control test. It is not necessary for the claimant to satisfy both tests to win. All the claimant has to meet is one of the two tests to prove employment. “The test…(is) essentially an economic and functional one, and the determinative criteria not the inconclusive details of the arrangement between the parties, but rather the extent of the economic dependence of the worker upon the business he serves and the relationship of the nature of his work to the operation of that business.” Marcus v. Eastern Agricultural Ass’n, Inc., 58 N.J. Super. 584, 603 (App. Div. 1959), rev’d, 32 N.J. 460 (1960).

Applying this test the Appellate Division reasoned that respondent was involved in the sheet rocking business because it contracted to do the sheet rocking; respondent supplied most of the job needs; respondent depended on petitioner’s work and hired him three to four times per month. Therefore, there was an economic dependence between the parties.

This test bears further analysis. Practitioners and adjusters should ask themselves two basic questions in beginning the analysis of whether there is a valid independent contractor defense:

  1. Was the work of the petitioner an integral part of the regular business of respondent?
  2. Was the worker economically dependent on the employer?

Beyond these questions, the following checklist should be considered in making the ultimate determination whether the worker is an independent contractor or an employee:

  • Review type of payments, W-2, 1099s or cash
  • Review payroll records for the worker
  • Read any contracts between the companies involved, including indemnification clauses, which may render the independent contractor defense moot
  • Investigate any pending IRS issues pertaining to the worker’s status
  • If in the construction field, determine who supplied the tools and equipment
  • Check the method of transportation of the worker to the job site
  • Investigate whether there are other sources of income or whether the putative employer is the only source of income
  • Determine the percentage of income from the alleged employer in question to the worker’s overall income
  • Review any written agreements between the worker and the entity
  • Find out how insurance coverage on vehicles was handled

Once the foregoing questions have been answered, it is usually rather easy to determine in advance of trial how a judge will view the independent contractor defense. No one factor is paramount but all must be considered together. Written agreements alone which state that the worker is an independent contractor do not control the outcome. Rather, courts look at the functional relationship between the parties. Another way of stating this is that New Jersey courts focus on substance over form in resolving independent contractor issues.

The mere fact that the worker has his or her own private business does not negate employee status when performing work for another entity. In Kertesz, supra, the petitioner had a business of his own but was nevertheless found to be an employee of the respondent.



About the Author

About the Author:

John H. Geaney, a shareholder and co-chair of Capehart Scatchard's Workers' Compensation department, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.


Post a Comment

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.