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Zelkina v. Orlioukova


February 23, 2009


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket L-7915-07.

Per curiam.


Submitted January 12, 2009

Before Judges Carchman, R. B. Coleman and Simonelli.

In this whistleblower case, plaintiff Lidia Zelkina appeals from the April 11, 2008 order dismissing her complaint for failure to state a claim upon which relief can be granted, R. 4:6-2(e).*fn1 We reverse.

The facts are summarized from the record. On November 14, 2005, defendant Confident Care Corporation (Confident Care) entered into a Consulting Agreement with First Choice, LLC, (First Choice) an entity providing accounting services to individuals and corporations. Plaintiff, a partner of First Choice, signed the agreement on First Choice's behalf. Plaintiff contends that although she was an independent contractor under the agreement, she was actually an employee of Confident Care for the purpose of asserting a claim under the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14. She claimed that she worked forty hours a week at Confident Care's offices, held the title of "controller," and handled all of Confident Care's audits, accounting and banking operations. She also claimed that Confident Care provided her supplies and support staff, gave her four weeks paid vacation, six paid holidays and five sick days and paid her healthcare and travel expenses.

Plaintiff also contends that defendant Elena Orlioukova gave Confident Care's workers' compensation carrier a fraudulent list of employees in order to save on yearly premiums. After advising defendants that she would not partake in defrauding the workers' compensation carrier, plaintiff was terminated.

Defendants claim that it terminated the agreement because of plaintiff's material breaches. They allege that plaintiff improperly provided services to Confident Care's competitors, disclosed confidential information to a competitor, competed with Confident Care as a partner of a competitor, and used Confident Care's computer system and software to work on matters for a competitor.

In support of their motion to dismiss, pursuant to R. 4:6-2(e), defendants argued that CEPA does not apply to plaintiff's individual claims against Orlioukova and that CEPA does not apply at all because plaintiff was an independent contractor. The motion judge granted the motion, finding that plaintiff was an independent contractor under the agreement who was not entitled to CEPA protections and that she never reported the alleged fraud to an outside agency. The judge did not rule on the individual claims against Orlioukova.

We first emphasize that the motion judge erred in dismissing the complaint under R. 4:6-2(e). Because the judge relied on matters outside the pleadings,*fn2 he was required to treat the motion "as one for summary judgment and dispose[] of [it] as provided by R. 4:46[.]" R. 4:6-2.

To resolve a summary judgment motion in a CEPA case based on an "independent contractor" issue, the court must consider the following factors:

(1) the employer's right to control the means and manner of the worker's performance; (2) the kind of occupation--supervised or unsupervised; (3) skill; (4) who furnishes the equipment and workplace; (5) the length of time in which the individual has worked; (6) the method of payment; (7) the manner of termination of the work relationship; (8) whether there is annual leave; (9) whether the work is an integral part of the business of the "employer;" (10) whether the worker accrues retirement benefits; (11) whether the "employer" pays social security taxes; and (12) the intention of the parties. [D'Annunzio v. Prudential Insurance Company of America, 192 N.J. 110, 123 (2007) (quoting Pukowsky v. Caruso, 312 N.J. Super. 171, 182-83 (App. Div. 1998)).]

The court must also consider "the extent to which there has been a functional integration of the employer's business with that of the person doing the work[,]" and "the worker's economic dependence on the employer's work[.]" Id. at 123-24.

Here, the court did not engage in a D'Annunzio analysis. He improperly based his decision solely on the agreement. The judge also erroneously determined that CEPA requires reporting illegal activity to an outside agency. CEPA prohibits an employer's retaliation against and employee who "[o]bjects to, or refuses to participate in any activity, policy or practice which the employee reasonably believes [] is fraudulent or criminal[.]" N.J.S.A. 34:19-3c(2). Reporting illegal activity to an outside agency clearly is not required to sustain a CEPA claim. Defendants apparently concedes this as they do not address this issue in their merits brief.

And finally, individual liability is cognizable under CEPA:

Under CEPA, an "employer" is liable for retaliation against an employee. N.J.S.A. 39:19-3. An "employer" is defined as "any individual, partnership, association, corporation or any person or group of persons acting directly or indirectly on behalf of or in the interest of an employer with the employer's consent." N.J.S.A. 39:19-2a (emphasis added). The underlined portion of the definition of "employer" includes a business entity's employee. A fair reading of the statute therefore makes both the employer and the employee subject to CEPA's prohibitions. [Maw v. Advanced Clinical Communications, Inc., 359 N.J. Super. 420, 439-40 (App. Div. 2003); rev'd on other grounds, 179 N.J. 439 (2004).]

See also Higgins v. Pascack Valley Hospital, 158 N.J. 404, 425 (1999). Thus, plaintiff can assert individual claims against Orlioukova.


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