On certification to the Superior Court, Appellate Division, whose opinion is reported at 383 N.J. Super. 270 (2006).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
This appeal requires the Court to address who is included in the definition of an employee and entitled to the protection of the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -8.
In February 2000, Prudential hired Plaintiff George D'Annunzio as a chiropractic medical director in its Personal Injury Protection (PIP) Department. Prudential's PIP Department reviews and pre-approves treatment plans submitted by doctors who treat Prudential's insureds and other covered claimants injured in automobile accidents. Prudential designated D'Annunzio and other doctors in its PIP Department as "independent contractors," and required them to maintain an active private professional practice and to agree that their hours billed to Prudential would not exceed fifty percent of their total professional practice.
For tax purposes, D'Annunzio executed his "Consultant Agreement" with Prudential in the name of his professional association rather than as a licensed individual. Pursuant to the agreement, D'Annunzio was paid for twenty hours of work per week, to be performed at a designated Prudential PIP claims office from 8:00 a.m. until noon on weekdays. Both parties had the right to terminate the relationship without cause on sixty-days notice.
According to D'Annunzio, Prudential sought to exert extensive control over him. D'Annunzio received a list of duties, workflow instructions, and a time sheet. In the summer of 2000, D'Annunzio informed supervisors of his objection to insurance violations that he perceived were being perpetrated by Prudential, expressing concern about Prudential's failure to pay MRI bills, hiring non-medical vendors to perform medical evaluations, and improper use of nurse case managers in the approval of medical care.
In August 2000, D'Annunzio's supervisors informed him that his performance was not meeting expectations. Among other things, he was advised to speed up his review of treatment files and to reduce the number of treatment plans that he was denying. On September 11, 2000, Prudential gave D'Annunzio written notice that it was terminating its agreement with him based on the sixty-day notice provision.
D'Annunzio filed this action against Prudential, alleging he was fired because he had complained about Prudential's lack of regulatory and contractual compliance and that his termination was in violation of CEPA. He also asserted common law claims for breach of contract and wrongful discharge. The trial court granted the summary judgment motion of the Prudential defendants. Applying the test of Pukowsky v. Caruso, 312 N.J. Super. 171 (App. Div. 1998), the court concluded that D'Annunzio was an independent contractor not entitled to advance a claim under CEPA. D'Annunzio's other claims were dismissed also.
D'Annunzio appealed and the Appellate Division reversed. Also using the Pukowsky test as a paradigm for its analysis, the panel held that whether a professional person is an "employee" under CEPA's definition must hinge more on the degree of "control and direction" exercised by the employer over the professional worker, and less on the lack of financial arrangements indicative of a traditional employee. It found that the record was replete with evidence suggesting that Prudential controlled and directed D'Annunzio and concluded that the entry of summary judgment for defendant was in error. The matter was remanded to the trial court.
The Supreme Court granted Prudential's petition for certification.
HELD: D'Annunzio presents many facts that support the creation of an employment relationship for CEPA purposes, notwithstanding that his agreement described him as an independent contractor.
1. CEPA is designed to promote two complementary public purposes: to protect and thereby encourage employees to report illegal or unethical workplace activities and to discourage employers from engaging in such conduct. As broad, remedial legislation, the statute must be construed liberally. (pp. 9-11)
2. CEPA defines "employee" as "any individual who performs services for and under the control and direction of an employer for wages or other remuneration." N.J.S.A. 34:19-2(b). As the Appellate Division noted, the definition does not exclude persons who are designated as independent contractors performing services for remuneration. Our courts have long recognized that, in certain settings, exclusive reliance on a traditional right-to-control test to identify an "employee" does not necessarily result in the identification of all those workers that social legislation seeks to reach. When CEPA or other social legislation must be applied in the setting of a professional person or an individual otherwise providing specialized services allegedly as an independent contractor, the considerations that must come into play are three: (1) employer control; (2) the worker's economic dependence on the work relationship; and (3) the degree to which there has been a functional integration of the employer's business with that of the person doing the work. (pp. 11-14)
3. The test for determining those aspects of a non-traditional work relationship was set out in Pukowsky and this Court has already indicated acceptance of that test as appropriate for CEPA purposes. The Pukowsky test is a hybrid that reflects the common law right-to-control test, and an economic realities test. It focuses heavily on work-relationship features that relate to the employer's right to control the non-traditional employee, and allows for recognition that an employer cannot be expected to exert control over specialized services that are beyond the employer's ability. Yet, the work may be an essential aspect of the employer's regular business. Therefore, the test allows for examination of the extent to which there has been a functional integration of the employer's business with that of the person doing the work. Several questions elicit facts that demonstrate functional integration: Is the work continuous and required for the employer's business? Is the professional regularly at the employer's disposal? Is the professional required to perform routine or administrative activities? If so, an employer-employee relationship more likely has been established. CEPA's deterrent function would be undermined if such individuals were declared ineligible for its protection. (pp. 14-17)
4. The test for an "employee" under CEPA's coverage must adjust to the specialized and non-traditional worker who is nonetheless integral to the business interests of the employer. The Court reaffirms that the Pukowsky test fulfills that purpose. The trial court and the Appellate Division resorted to the Pukowsky criteria, but the Appellate Division concluded that the trial court did not properly weigh the factors that examine the employer's right to control the work of a licensed professional like D'Annunzio -- the right to manage how the work is performed for the purposes of the employer's business operations. This Court agrees with the emphasis in the Appellate Division's analysis and adds that the Pukowsky test also appropriately examines the relationship to determine whether the professional services have been incorporated into the work of the business and the impact of that work on the professional's ability to offer services to the public. D'Annunzio's treatment plan review was an integral, indeed essential aspect of Prudential's operations. Moreover, D'Annunzio presented evidence that his day-to-day activities were controlled in minute detail. His time spent at Prudential's operations was continuous, week to week, and daily, for a substantial period of time during business hours. His duties included numerous administrative tasks, all to be performed in accordance with Prudential's protocols to meet their business plan. In sum, D'Annunzio pointed to many facts that support the creation of an employment relationship for CEPA purposes. (pp. 17-21)
Judgment of the Appellate Division is AFFIRMED as MODIFIED, and the matter is REMANDED to the trial court.
JUSTICE RIVERA-SOTO has filed a separate, DISSENTING opinion, expressing the view that the Legislature is very much aware of the difference between "employees" and "independent contractors," and the plain language of CEPA protects employees only; and that the parties' contract made it clear that D'Annunzio was an independent contractor.
CHIEF JUSTICE ZAZZALI and JUSTICES LONG, ALBIN and WALLACE join in JUSTICE LaVECCHIA's opinion. JUSTICE RIVERA-SOTO filed a separate, dissenting opinion. JUSTICE HOENS did not participate.
The opinion of the court was delivered by: Justice LaVECCHIA
New Jersey's Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -8, protects workers who blow the whistle on their employers' illegal, fraudulent, or otherwise improper activities that implicate the health, safety, and welfare of the public. The statute extends to "any individual who performs services for and under the control and direction of an employer for wages or other remuneration." N.J.S.A. 34:19-2(b) (defining "[e]mployee[s]" entitled to CEPA protection). The question here is who is included in that definition. We have recognized previously that that definition is not limited to a narrow band of traditional employees. In this appeal, we reaffirm the appropriateness of the Pukowsky*fn1 test for assessing the status of an alleged "independent contractor" claiming protection as an "employee" under CEPA.
The appeal comes to us on a summary judgment record that focused solely on the "independent contractor" versus "employee" issue. Because the defendants claimed an entitlement to judgment based on that record, we view the facts in the light most favorable to the party opposing that motion and, therefore, accord to plaintiff all favorable inferences that support his claim to CEPA's protection. See R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
In February 2000, defendant Prudential Property and Casualty Insurance Company (Prudential) hired plaintiff George D'Annunzio as a chiropractic medical director in its Personal Injury Protection (PIP) Department. Prudential's PIP Department reviews and pre-approves treatment plans submitted by the doctors who treat Prudential's insureds and other covered claimants injured in automobile accidents. It is the responsibility of the medical directors and nurse case managers to determine whether the proposed treatments are medically necessary, consistent with the PIP reforms authorized by the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1.1 to -35. Insurers engage licensed medical professionals to provide independent medical judgments as to the medical necessity of treatment plans submitted for approval. See N.J.S.A. 39:6A-3.1(a); N.J.A.C. 11:3-4.7(c)(4).*fn2 Prudential opted to meet that requirement by having a cadre of licensed professionals in-house to perform the review function, but it designated those professionals as "independent contractors." Indeed, Prudential required every licensed medical director to maintain an active private professional practice and to agree that their hours billed to Prudential would not exceed fifty percent of their total professional practice.
Prudential sent D'Annunzio a one-year "Medical Director Consultant Agreement" that was described as "standard" for the position. For tax purposes, D'Annunzio executed the agreement in the name of his professional association (George D'Annunzio D.C.P.A.) rather than as a licensed individual, although the parties apparently agree that only a licensed individual could perform the tasks for which D'Annunzio was retained. Pursuant to the agreement, D'Annunzio was paid $125 per hour for twenty hours of work per week. D'Annunzio agreed to perform his services at a designated Prudential PIP claims office, Monday through Friday, from 8:00 a.m. until noon.
In respect of the relationship between the parties, the agreement stated that [t]he relationship between Prudential and the Medical Director is that of independent contractor. The Medical Director will maintain his own private practice and provide Medical Director services on a part time basis. . . . None of the provisions of this agreement are intended to create or be ...