A New Jersey independent contractor agreement is a document that outlines the relationship between a contractor providing services to a client. A client usually implements this agreement on a per-project basis, so the contractor doesn’t have employee status.
- Worker Classification: ABC Test
- Tax Structure: Graduated-Rate Income Tax
- Definition: New Jersey Revised Statutes Section 43:21-19
- At-Will Employment: Yes
Independent Contractor Definition
According to New Jersey law, every worker is an employee unless they are an independent contractor. Simply being issued a 1099 form for tax purposes does not make someone an independent contractor. Independent contractors are defined by the ABC test alone in the state of New Jersey. [1]
Worker Classification Test
New Jersey uses the ABC test to define workers between employees and independent contractors. [2] Under the ABC test, a worker is always classified as an employee rather than an independent contractor unless the following three criteria are all met:
- The worker has control over the performance of the work, the means of finishing the work, and the direction in which the work is done;
- The work is performed outside of the company’s typical business or industry or the work is performed outside the enterprise’s usual places of business; and
- The worker is regularly engaged in independent contracting for projects similar to the current work performed.
Without meeting all three standards, a worker must be classified as an employee.
Rights and Responsibilities
New Jersey doesn’t have any unique rights for independent contractors. As with most states, independent contractors have the right to:
- Have a written contract with their client detailing the business relationship
- Be paid in a timely and reasonable fashion
- Control their working conditions, including the means they use to finish a project and when and where they work
Some other rights and responsibilities for New Jersey contractors to consider include:
State Taxes
New Jersey utilizes a common law standard that gives clients the right to perform a control test when evaluating worker classification for tax purposes. In order to file taxes as an independent contractor, an individual needs to meet the requirements of the ABC test and be classified as such, as per New Jersey law.
A client doesn’t withhold income taxes from a contractor. Rather, a contractor needs to report and file their income taxes independently.
Filing for Unemployment
Independent contractors are paid on a commission basis and set the parameters for their own work. As a result, independent contractors are considered self-employed and are unable to collect unemployment. Employees who have been misclassified as independent contractors may challenge the misclassification in order to receive unemployment.
Compensation for Work Injuries
Contractors aren’t included under the New Jersey Unemployment Compensation Law. They can’t seek workers’ compensation for work-related injuries because they don’t have the same protections as employees.
Sample
View a sample of our New Jersey independent contractor agreement. Download it as a PDF or Word file below:
