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New Jersey employees enjoy more rights, benefits and privileges than independent contractors. But independent contractors (ICs) have more freedom and may retain rights to their intellectual property.
Employee Rights and Benefits Overview
In New Jersey, employers are required to carry workers’ compensation insurance to cover their employees when they become ill or are injured on the job due to their work duties. Unemployment insurance is also required, providing eligible workers with partial income replacement when they lose their jobs. Other areas where employees are protected by the law include wages, overtime, breaks, safety, discrimination, paid vacation, taxes, and special needs accommodations.
Your employer must pay you a set minimum wage, or higher, and provide overtime pay at time and a half when you work more than 8 hours in a day. Exceptions apply for exempt workers. When you work in a hazardous environment or with dangerous materials or chemicals, your employer must provide the proper safety training, equipment and additional concessions to minimize risks and potential dangers. These are some of the rights established by the employee / employer relationship that don’t apply to ICs.
Independent Contractor Rights
As an independent contractor, the business or individual you provide services for owes you far less than they would in an employee / employer arrangement.
Self-employment Taxes
Independent contractors are fully responsible for paying FICA and Medicare taxes to the government, unlike employees who share this tax burden with their employer. However, you do enjoy more freedom in claiming business expenses, and may write off a larger share than do employees in their tax filings. This makes sense because, as an independent contractor, you typically incur more business costs and expenses, like staffing, equipment, and advertising.
Intellectual Property
As an independent contractor, you maintain ownership of your creative works unless you expressly assign them to the business you’re working for. This means you keep the copyrights to your written works, and the videos, photographs, web designs, software code, logos and more that you create. This remains true even when you are paid to create this property. This situation applies in most cases with patents, trademarks and other intellectual property, as well.
This is not the case with employees – when creating this type of property within the scope of their employment, the intellectual property belongs to the employer. And many companies erroneously assume that’s the case in any working relationship. However, you should be aware that unless your works are categorized as work-for-hire material, or you have a “Work for Hire” contract or some other similar agreement assigning your rights to your client, as an IC, you remain the owner of your creative works. Licensing rights to your creative output is another option.
Work-for-hire Material
The following nine categories identify work-for-hire creative property under copyright law, when purchased/ordered for use.
- Contributions to collective works
- Translations
- Supplementary work
- Atlases
- Compilations
- Instructional text
- Tests
- Answers to a test
- Sections of audiovisual work, like movie scenes
Work Schedule
ICs have far more freedom while completing their work than do employees. As an IC, you shouldn’t have to be available during specific hours or be required to “check-in” with a boss or supervisor regularly while working. Essentially, as long as you meet specific pre-arranged deadlines, you’re likely meeting your work requirements under a contracting arrangement.
If your client makes demands on you about the hours you work, where you perform your duties, how you perform your job duties, the equipment you use, and/or other specific oversight, they may be misclassifying you as an IC, when you’re actually an employee. This can be a costly error for employers.
Independent Contractor Misclassification
Because employees are owed more protections and benefits than ICs, some companies are tempted to misclassify employees as ICs. This allows them to neglect payments of some federal tax withholdings, insurance coverage, retirement plan offerings, and various other benefits.
While there is no simple test that definitively identifies a worker as either an employee or an IC, there are many guidelines that highlight potential misclassification. In New Jersey, the ABC test is a strong indicator of whether a worker is an IC.
- The IC operates without direction of control from the company he contracts with;
- The service the IC provides is outside of the contracting company’s typical course of business, or workplaces, and
- The IC operates as an independently controlled business or trade.
There are several ways to determine whether all three prongs of this test apply. An experienced employment lawyer can help you make this determination. If the company you work for has erroneously classified you as an IC, you may be able to recover compensation for Medicare and Social Security taxes you’ve paid as self-employment tax, wage underpayment, overtime pay, and much more.
Whether you’re an IC or an employee, you have rights protected by state and federal laws. When your client or employer violates these rights, you have legal recourse. Our team at Castronovo & McKinney is armed with the skills and knowledge to help you recoup your losses in the employment arena. Contact us to discuss your case and learn how we can help.