The New Jersey Appellate Division recently handed down a decision in Kennedy v. Weichert Co., Docket No. A-0518-19, rejecting the use of the well-established “ABC” test when deciding whether a real estate salesperson is an independent contractor or employee under the New Jersey Wage Payment Law (“WPL”). The Court held that the plain language of the 2018 and 2022 amendments to the Real Estate Brokers and Salesmen Act (the “Act”) permit the possibility of either an employer-employee or independent contractor relationship— independent of the ABC test. Unsurprisingly, the holding is fact-sensitive and should be applied as such.
By way of background, Plaintiff for the putative class brought a wage and hour claim under the WPL against Weichert Realtors for improper withholdings from compensation in the form of deductions for marketing, insurance, and other expenses. Weichert filed a motion to dismiss arguing that real estate salespersons are independent contractors and that the WPL only covers employees. The trial court denied the motion relying on the Supreme Court’s decision in Hargrove v. Sleepy’s, LLC, 220 N.J, 289 (2015) which held “that the ‘ABC’ test… governs whether a plaintiff is an employee or independent contractor for purposes of resolving a wage-payment or wage-and-hour claims.” Id. at 295. As a fact-sensitive test, the trial court held it was too early in the case to dismiss the claim outright.
Weichert argued that the ABC test is inconsistent with the Act’s 2018 and 2022 amendments that specifically address the existence of either an employee or independent contractor relationship under the WPL. The Appellate Division agreed.
The Appellate Division noted that the traditional ABC test under the Act would always result in a claimant being found to be an employee under the WPL and, therefore, was inconsistent with and could not be applied under the Act. The Court cited to Section 3.2(b) of the Act that states “a business affiliation between a broker and a broker-salesperson or salesperson may be that of an employment relationship or the provision of services by an independent contractor.” The language on its face denotes that a salesperson can be one or the other. Further, the amendments repeatedly use the words “or contracted” after the word “employee” to further permit the co-existence of either possibility. Lastly, these amendments require that every salesperson enter into a written agreement and that “[t]he nature of the business affiliation shall be defined in the written agreement.” While these agreements are not dispositive, they are a significant factor when determining one’s status.
This decision impacts all real estate salespersons/brokers throughout New Jersey and the businesses retaining them. All companies working with real estate salespersons/brokers should have written agreements with them clearly describing their independent job duties, functions and status as independent contractors to avoid having to defend costly litigation involving claims for employee benefits.