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Special Care of New Jersey, Inc. v. Board of Review

327 N.J. Super. 197, 742 A.2d 1023 (App. Div. 2000) (Unpublished)

EMPLOYER-EMPLOYEE; UNEMPLOYMENT TAXES—An employer’s exemption from paying federal unemployment taxes for sitters doesn’t mean that the employer is exempt from New Jersey taxation.

For purposes of federal unemployment tax, “a person engaged in the trade or business of putting sitters in touch with individuals who wish to employ them shall not be treated as the employer of such sitters and such sitters shall not be treated as employers of such person if such person does not pay or receive the salary or the wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis.” Here, a placement agency recruited and interviewed sitters or caretakers and acted to assign clients in need of services to each sitter. The sitters or caregivers filed their hours with a billing service retained by the agency. The billing service processed all of the paper work and received payments from third-party payers. It then paid the caregivers and forwarded a fee to the agency. In connection with a temporary disability benefits claim by one caregiver, the State sought to charge the agency for disability premiums for the caregivers. The agency argued that because it was not a “covered employer” under federal law, it should also not be held to be a “covered employer” under state law. Its argument was that “Congress unequivocally intended to exempt companion sitting placement agencies like [itself] from the financial and administrative burden of federal and state unemployment taxes, so long as the agencies did not pay the sitters they placed with their ... clients.” The Court disagreed. Repeating language from an earlier case, it said that Congress “did not undertake to create a nationally administered employment compensation system.” Instead, it found that Congress encouraged the states to set up their own unemployment compensation systems by granting employers a credit for taxes paid to state unemployment plans. Further, federal unemployment tax law and New Jersey’s unemployment tax law, although complimentary “are distinct and separate, representing ‘independent acts of two distinct legislative bodies.’” New Jersey’s unemployment compensation laws “represent an exercise of police power that ‘provide[s] a cushion for the workers of New Jersey against the shocks and rigors of unemployment.’” The Temporary Disability Benefits Law was specifically intended to fill the gap left by New Jersey’s Unemployment Compensation Law and the Workers’ Compensation Act. Nothing in the plain language of the federal law suggested that Congress intended to supercede New Jersey’s exercise of its police power in achieving those goals.


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