Lesniewski v. W.B. Furze Corporation

308 N.J. Super. 270, 705 A.2d 1243 (App. Div. 1998)
  • Opinion Date: February 23, 1998

EMPLOYER-EMPLOYEE; WORKER’S COMPENSATION—It matters less who writes the paychecks than it does who controls the work activities in determining which of two candidates is a particular worker’s employer for purposes of worker’s compensation.

A construction worker was hired by a contracting company in November, 1994 to help with renovation of a restaurant. Beginning in March, 1995, the worker received payment directly from the restaurant company because the contracting company was having cash flow problems. In April, 1995, the worker was paralyzed while on the job and the issue was whether he was an employee of the contractor or the restaurant company. The president of the contracting company claimed that in January, 1995, the company ceased to be an independent contractor, and that the president, individually, became an employee of the restaurant company along with all the other workers, including the injured one. The Division of Workers’ Compensation found that the contracting company was a validly existing independent employer, and that the injured worker was one of its employees. This decision was based on the fact that the restaurant company had no experience or ability in construction matters and did not direct, control or supervise any of the workers in any way. The president of the contracting company appealed, claiming his company was not liable under the Workers’ Compensation Act for the injuries sustained.

The Appellate Division began by reciting two tests used to determine whether one is an employee or an independent contractor. Under the “control test,” an employer-employee relationship exists whenever one retains the right to determine what shall be done and how it shall be done, and directs another accordingly. In addition to this right of control over another’s actions, other important factors in this test are the right of termination, the furnishing of equipment, and the method of payment. The second test is the “relative nature of the work,” which finds an employer-employee relationship if the work done by the employee is an integral part of the regular business of the alleged employer.

The Court found that the change in the payment terms (from the restaurant paying the contracting company to separately paying the individual workers) did not affect control or supervision over the workers or how the work got done. Such responsibility remained in the hands of the contracting company, which acted through its president. Thus, the Court held that the contracting company was an independent employer under the “control test.” The Court concluded that, for purposes of the Worker’s Compensation Act, employee status had less to do with who writes the paychecks than with who controls the work activities of the employee. Under the “relative nature of the work” test, the Court found that the contractor retained a separate identity since the regular business of the restaurant was not construction of buildings. The contractor argued that the restaurant was a contractor since it incorporated for the purpose of building a restaurant, and hired subcontractors. However, the Appellate Division ruled that an owner of property who enters into separate contracts for plumbing, carpentry, and electrical work is not a contractor under the Workers’ Compensation Act.

After finding that neither the contracting company nor its president were employees of the restaurant, the Court applied these tests to the injured worker’s relationship with the contractor and the restaurant. The Court found that even though the injured worker received some paychecks from the restaurant, he was an employee of the contractor since the contractor had discretion to retain or fire him, as well as the ability to direct his actions. Furthermore, the worker used the contractor’s equipment and was doing work the contractor was hired to do. Again, the employer-employee relationship had more to do with the ability to direct and control actions than with the source of payment.