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Same Day Express, Inc. v. New Jersey Dep't of Labor and Workforce Development

June 7, 2007


On appeal from New Jersey Department of Labor and Workforce Development, OAL Docket No. LID 00851-05 and Agency No. DOl-05-001.

Per curiam.


Argued May 1, 2007

Before Judges Kestin and Lihotz.

Petitioner, Same Day Express, Inc., appeals from a final administrative action issued on January 6, 2006, by the Commissioner of the Department of Labor and Workforce Development (DOL), affirming the initial decision of the Administrative Law Judge (ALJ), which required payment, after reassessment, of employer contributions for unemployment and temporary disability insurance benefits for individuals found to be petitioner's employees during an audit period. We affirm.

Petitioner operated a small package delivery service. Petitioner had reported its employees consisted of salaried managers and one full-time driver. Petitioner also engaged twenty-eight contract drivers to deliver packages entrusted to petitioner. The DOL performed a random audit for the years 1998 through 2002, to determine whether petitioner was "properly reporting their [sic] unemployment [contributions]." DOL auditor, John Way, concluded that remuneration paid to the contract drivers who provided courier services for petitioner were misclassified as payments to "subcontractors." Way maintained the drivers' services constituted "covered employment," pursuant to the New Jersey Unemployment Compensation Act (Act). N.J.S.A. 43:21-1 to --71. Petitioner received a demand for payment of the determined contribution deficiency in the amount of $46,014.24.

Petitioner disputed the audit conclusions and submitted its request for a hearing to the Office of Administrative Law (OAL). Richard Cupolo, petitioner's owner and president, testified, during the hearing before the ALJ, regarding the company's two bases of operation. One provided same-day delivery service and was adjacent to its client, McMaster Carr Supply. The other offered next-day delivery service and was located at petitioner's warehouse. Principally, the contract drivers provided delivery services for the benefit of McMaster. The contract drivers arrived at McMaster's site to obtain the same-day delivery assignments.

Petitioner argued that the DOL failed to investigate the independent nature of these drivers' businesses, by interviewing them or seeking their income tax records. Cupolo asserted that the individual drivers used their own vehicles, some of which had commercial license plates; supplied any tools needed, such as hand trucks; obtained their own insurance; set their own hours; at times, utilized helpers; arranged their own schedules and routes; paid all costs of performing the services, including gasoline, vehicle, or tolls; and satisfied their individual income tax liability. Some drivers also had business cards, vehicle signage, and cellular telephones.

Cupolo stated compensation for contract drivers was on a "per package basis," which consisted of a flat fee of $120 per day plus additional payments, after consideration of the distance of the delivery. Cupolo stated that the latter sum was subject to negotiation. The drivers were issued Form 1099s, which recorded payments provided by petitioner. Contract drivers were not constrained to provide services solely for petitioner and could contract contemporaneously with other courier companies.

Cupolo stated that several of the contract drivers used services provided by NICA, Inc., known as the National Independent Contractors Association (NICA), rather than individually incorporating. Each week, Cupolo calculated the amount due to the NICA drivers and transferred that total sum to an NICA account. NICA issued the drivers' checks and offered insurance, tax assistance and other services. NICA submitted the year-end Form 1099s to drivers registered with the association.

In her recommended decision dated November 29, 2007, ALJ Cohen examined the statutory definition of "employment," governed by N.J.S.A. 43:21-19(i)(1)(A). That statute defines employment as: "[a]ny service performed . . . for remuneration or under any contract of hire, written or oral, express or implied." Ibid. Finding that the contract drivers performed a service for remuneration, the ALJ noted the burden of persuasion then shifts to petitioner to show that the services fall outside those of defined "employment," by satisfying each of the three- prongs of, what has come to be known as, the "ABC test," N.J.S.A. 43:21-19(i)(6)(A), (B), and (C). Carpet Remnant Warehouse, Inc. v. N.J. Dep't. of Labor, 125 N.J. 567, 581 (1991). The statutory ABC test provides, in pertinent part:

(6) Services performed by an individual for remuneration shall be deemed to be employment . . . unless and until it is shown to the satisfaction of the division that:

(A) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and

(B) Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the ...

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