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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 enterprise for which such service is performed; and

(C) Such individual is customarily engaged in an independently established trade, occupation, profession or business. [N.J.S.A. 43:21-19(i)(1)(6).]

Agreeing with petitioner that the DOL should "have done a more through investigation," the ALJ determined that petitioner satisfied the first two prongs of the statutory test; however, petitioner failed to provide, by a preponderance of credible evidence, proofs sufficient to satisfy subsection (C). In this regard, ALJ Cohen stated:

The petitioner provided very little information to substantiate this prong of the ABC test . . . . Cupolo testified that some of the drivers had business cards; all of the drivers used their own cars[], some had signs on their car, and all of them paid for their own gas and purchased their own insurance[]. However, he provided no documentation to substantiate the business cards, business stationary [sic], signs on the vehicles or commercial plates and did not testify as to whether any of the drivers, . . . had these documents . . . While he stated that he did not care if the drivers worked for other companies, the petitioner did not provide any independent testimony or proof that the drivers in fact worked for someone else and received income from any source other than Same Day, during the period in question.

Consequently, ALJ Cohen recommended that all unincorporated contract drivers utilized by petitioner, beginning April 1, 1999, through the conclusion of the audit period, be deemed petitioner's employees, subject to the imposition and payment of unemployment and temporary disability assessments. The ALJ further concluded that, except for the one driver whose income tax documents were admitted into evidence to show his annual net receipts for 2002, the gross payments made by petitioner to the drivers were subject to assessment.

The Commissioner, by his decision and order dated January 6, 2006, accepted and adopted the findings of fact, conclusion, and recommendation contained in the ALJ's Initial Decision. On appeal, petitioner seeks a de novo review of the Commissioner's determination. Only compliance with subsection (C) of N.J.S.A. 43:21-19(i)(1)(6) is at issue. Petitioner maintains it has sufficiently shown that the drivers were engaged in an independently established business and, therefore, the Commissioner's action must be reversed. In the alternative, petitioner suggests that a remand must be ordered to allow additional proofs addressing the independent business of the drivers.

In reviewing administrative decisions, our scope is limited. We will not overturn the ultimate decision of an agency unless it is shown that it was arbitrary, capricious or unreasonable, or that it violated legislative policies expressed or implied in the act governing the agency. Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 587 (1988); Close v. Kordulak Bros., 44 N.J. 589, 599 (1965). An agency's interpretation of a statute is entitled to some weight, however that interpretation is not binding. Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973). In this case, because the Commissioner accepted the ALJ's fact-findings and determinations of credibility, we need only determine whether the Commissioner properly applied the third prong of the ABC test to the facts presented.

It is well settled that, the primary objective of [N.J.S.A. 43:21-19] is to provide a cushion for the workers of New Jersey 'against the shocks and rigors of unemployment.' Because the statute is remedial, its provisions have been construed liberally, permitting a statutory employer-employee relationship to be found even though that relationship may not satisfy common-law principles. [Carpet Remnant, supra, 125 N.J. at 581 (1991) (citing Provident Inst. for Sav. in Jersey City v. Div. of Employment Sec., 32 N.J. 585, 590 (1960).]

The double requirement of the statute, that an individual must be "customarily engaged" and "independently established," calls for a business that "exists and can continue to exist independently of and apart from the particular service relationship" with the putative employer. Gilchrist v. Div. of Employment Sec., 48 N.J. Super. 147, 158 (App. Div. 1958). The determination is fact-sensitive and requires an evaluation of the substance, not the form, of the relationship. See Provident, supra, 32 N.J. at 591; see also Trauma Nurses, Inc. v. Bd. of Review, 242 N.J. Super. 135, 142 (App. Div. 1990). While petitioner demonstrated that it regarded and treated the drivers as independent contractors, it did not convincingly establish particular facts demonstrating the drivers were conducting independent business operations, including business relationships with other entities. The documentation submitted at the hearing was for one driver whose livelihood clearly depended upon the continued connection with petitioner, as the relationship provided his sole source of income. The Form 1099s introduced for other drivers leads to no different conclusion. No proof that the drivers worked simultaneously for other couriers or brokers was provided; Cupolo's general claims to the contrary, without documentary support, are not persuasive.

The alternative argument that "petitioner's generalized comments about the[] [driver's] other jobs . . . requires a remand," see Koza v. New Jersey Dept. of Labor, 282 N.J. Super. 560, 568-69 (App. Div. 1995), is rejected. In Koza, limited documentary proofs were introduced to support the petitioner's position that the musicians providing services also performed for several other entities and were engaged in an independent profession. Ibid. The petitioner supplied business cards, newspaper advertisements and resumes, along with witness testimony of observations of the musicians' simultaneous employment. Ibid. Lacking this kind of specificity and documentary support, petitioner fails to muster a compelling argument for remand.



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