1

SYLLABUS

This syllabus is not part of the Court’s opinion. 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 Court and may not summarize all portions of the opinion.

East Bay Drywall, LLC v. Department of Labor & Workforce Development

(A-7-21) (085770)

Argued March 14, 2022 -- Decided August 2, 2022

FUENTES, P.J.A.D. (temporarily assigned), writing for a unanimous Court.

In this appeal, the Court considers whether certain workers employed by East 

Bay Drywall, LLC, are properly classified as employees or independent contractors 

under the Unemployment Compensation Law, which sets forth a test -- commonly 

referred to as the “ABC test” -- to determine whether an individual serves as an 

employee. See N.J.S.A. 43:21-19(i)(6)(A) to (C).

East Bay is a drywall installation business that hires on a per-job basis. Once 

a builder accepts East Bay’s bid for a particular project, East Bay contacts workers 

-- whom it alleges to be subcontractors -- to see who is available. Workers are free 

to accept or decline East Bay’s offer of employment, and some workers have left 

mid-installation if they found a better job. East Bay’s principal testified that some 

workers said they worked for businesses aside from East Bay but admitted that he 

did not produce any evidence to support that claim. East Bay provides the workers 

with the raw materials necessary to complete the drywall installation. The workers 

perform the labor but must provide their own tools and arrange for their own 

transportation to the worksites. East Bay does not dictate who or how many laborers 

the workers must hire to complete the project. Although East Bay does not direct 

how the workers install drywall, the principal made clear East Bay remains 

responsible for the finished product.

On June 30, 2013, East Bay, a business registered as an employer up to that 

point, ceased reporting wages to the Department of Labor and Workforce 

Development. Consequently, an auditor for the Department conducted a status audit 

that reviewed the workers East Bay hired between 2013 and 2016 to determine 

whether they were independent contractors, as defined by the ABC test, or 

employees of East Bay, requiring the employer to contribute to the unemployment 

compensation and temporary disability funds. In addition to meeting with East 

Bay’s principal and accountant, the auditor requested documentation such as tax 

forms, business cards, and business insurance to determine whether the workers’ 

businesses were independent entities.
2

The auditor ultimately found that approximately half of the alleged 

subcontractors working for East Bay between 2013 and 2016 -- four individuals and 

twelve business entities -- should have been classified as employees. The 

Department informed East Bay that it owed $42,120.79 in unpaid unemployment and 

temporary disability contributions.

East Bay contested the results of the audit and requested a full hearing in the 

Office of Administrative Law, which concluded that three of the workers were 

employees but that the other thirteen were independent contractors. The 

Commissioner of the Department, who makes the final agency determination in such 

matters, determined that all sixteen workers failed all three prongs of the ABC test 

and that they were therefore all East Bay’s employees. The Appellate Division 

affirmed the Commissioner’s final determination as to five workers but reversed as 

to the eleven other workers. 467 N.J. Super. 131, 150-52 (App. Div. 2021). The 

Department appealed as to the eleven workers, and the Court granted certification. 

248 N.J. 400 (2021).

HELD: The Commissioner’s finding that East Bay did not supply sufficient 

information to prove the workers’ independence under the ABC test’s prong C was 

not arbitrary, capricious, or unreasonable, but rather was supported by the absence 

of record evidence as to that part of the test. The Court is satisfied that all sixteen 

workers in question are properly classified as employees, and it remands to the 

Department for calculation of the appropriate back-owed contributions.

1. The Unemployment Compensation Law (UCL), N.J.S.A. 43:21-1 to -71, was 

designed to act as a cushion “against the shocks and rigors of unemployment.” 

Carpet Remnant Warehouse, Inc. v. Dep’t of Labor, 125 N.J. 567, 581 (1991). It

requires that employers and employees make contributions to the unemployment 

compensation and temporary disability benefit funds. Those contributions come 

from “a specified percentage of the employee’s wages.” Id. at 582 (citing N.J.S.A. 

43:21-7). An employer’s contributions are due once the employer pays the 

employee. N.J.A.C. 12:16-5.1(a). N.J.S.A. 43:21-19(i)(1)(A) defines employment 

as “[a]ny service . . . performed for remuneration or under any contract of hire, 

written or oral, express or implied.” But, even if a worker receives compensation 

for work performed, the worker will not be considered an employee if the ABC test 

is satisfied. See id. § 19(i)(6). The ABC test is conjunctive; thus, all three prongs 

must be satisfied for a worker to be considered an independent contractor. The ABC 

test presumes a worker is an employee. The party challenging the Division’s 

classification carries the burden to “establish the existence of all three criteria of the 

ABC test.” Carpet Remnant, 125 N.J. at 581. Whether a worker is an employee 

under the ABC test “is fact-sensitive, requiring an evaluation in each case of the 

substance, not the form, of the relationship.” Ibid. (pp. 16-18)
3

2. Because the Court finds that East Bay did not supply sufficient information to 

satisfy its prong C burden regarding the eleven entities whose classification has been 

challenged by the Department, it does not analyze prongs A and B of the ABC test. 

The Court suggests, however, that the Department exercise its statutory authority 

and expertise, particularly in light of the prevalence of remote work today, to 

promulgate regulations clarifying where an enterprise “conducts an integral part of 

its business” and what constitutes the “usual course of the business” under prong B 

of the ABC test. See N.J.S.A. 43:21-7g; N.J.A.C. 12:71-1.3. (pp. 18-19)

3. Prong C of the ABC test broadly asks whether a worker can maintain a business 

independent of and apart from the employer. If the worker “would join the ranks of 

the unemployed” when the relationship ends, the worker cannot be considered 

independent under prong C. Carpet Remnant, 125 N.J. at 585-86. In some cases, it 

will be obvious that a worker was entirely dependent upon an employer because, 

when the working relationship ends, the worker is fully unemployed. In other cases 

-- where it is not as clear that the worker will be unemployed without the working 

relationship -- other factors may be illustrative of the underlying public policy at 

stake. For such situations, case law provides a variety of factors to be considered 

when evaluating a worker’s “ability to maintain an independent business,” and the

Court reviews those factors, including the factors set forth in Carpet Remnant, 125 

N.J. at 592-93. (pp. 19-22)

4. In the instant case, the information East Bay provided is insufficient to prove the 

entities’ independence. The probative value of refusal to accept or complete work is 

limited because, like an employee, even a bona-fide independent contractor is not 

free from the pressure to accept a job. A certificate of insurance could be a 

significant indication of independence, and business registration information may 

bolster the inference of independence. Here, however, these documents do not 

elucidate whether the disputed entities were engaged in independent businesses 

separate and apart from East Bay. The case at hand presents one of those lessobvious situations of whether the workers are truly independent business entities, 

but East Bay has provided little or no documentary evidence to address the factors

that indicate independence. The Court therefore finds that the Commissioner’s final 

decision was not arbitrary, capricious, or unreasonable, and it defers to that agency 

decision. See id. at 587. That decision is consistent with the public policy codified 

in the UCL. (pp. 22-26)

AFFIRMED in part, REVERSED in part, and REMANDED to the 

Department.

CHIEF JUSTICE RABNER and JUSTICES PATTERSON, SOLOMON, and 

PIERRE-LOUIS join in JUDGE FUENTES’s opinion.
1

SUPREME COURT OF NEW JERSEY

A-7 September Term 2021

085770

East Bay Drywall, LLC,

Petitioner-Respondent,

v.

Department of Labor

and Workforce Development,

Respondent-Appellant.

On certification to the Superior Court, 

Appellate Division, whose opinion is reported at

467 N.J. Super. 131 (App. Div. 2021).

Argued

March 14, 2022

Decided

August 2, 2022

Christopher Hamner, Deputy Attorney General, argued 

the cause for appellant (Matthew J. Platkin, Acting 

Attorney General, attorney; Jane C. Schuster and Alec 

Schierenbeck, Assistant Attorneys General, of counsel, 

and Achchana Ranasinghe, Deputy Attorney General, on 

the briefs).

Jennifer B. Barr argued the cause for respondent (Cooper 

Levenson, attorneys; Jennifer B. Barr and Russell L. 

Lichtenstein, on the brief).

Ravi Sattiraju argued the cause for amicus curiae 

National Employment Lawyers Association of New 

Jersey (Sattiraju & Tharney, attorneys; Ravi Sattiraju, of 

counsel and on the brief).
2

Jeffrey S. Jacobson argued the cause for amicus curiae 

New Jersey Civil Justice Institute (Faegre Drinker Biddle 

& Reath, attorneys; Jeffrey S. Jacobson, Jennifer G. 

Chawla, and W. Joshua Lattimore, on the brief).

JUDGE FUENTES (temporarily assigned)

delivered the opinion of the Court.

This appeal originated from a routine audit of East Bay Drywall, LLC 

(East Bay), conducted by the Department of Labor and Workforce 

Development (the Department), for the years 2013 through 2016. The purpose 

of the audit was to determine whether East Bay owed certain payments to the

Unemployment-Compensation and Temporary-Disability Benefit funds under 

N.J.S.A. 43:21-7. That determination turns on whether certain workers 

employed by East Bay during the audit period are properly classified as 

employees or independent contractors under the Unemployment Compensation 

Law, which sets forth a test -- commonly referred to as the “ABC test” -- to 

determine whether an individual serves as an employee. See N.J.S.A. 43:21-

19(i)(6)(A) to (C).

In 2017, the Department’s audit found sixteen of East Bay’s alleged

subcontractors were actually employees under the ABC test. East Bay thus 

owed $42,120.79 in unpaid contributions. Following an evidentiary hearing 

before an Administrative Law Judge (ALJ), the Commissioner of the 
3

Department concluded that the sixteen drywall workers were correctly 

classified by the Department as employees and ordered East Bay “to 

immediately remit to the Department . . . $42,120.79 in unpaid unemployment 

and temporary disability contributions” for the years 2013 through 2016, 

together with interest and penalties.

East Bay appealed the Commissioner’s final decision and order. In a 

published opinion, the Appellate Division held that only five of the sixteen 

entities should have been classified as employees because they were not viable 

independent business entities under the ABC test. E. Bay Drywall, LLC v. 

Dep’t of Labor & Workforce Dev., 467 N.J. Super. 131, 152-53 (App. Div. 

2021). The Appellate Division reversed the Commissioner’s decision as to the 

remaining eleven entities, however, noting that their provision of insurance 

certificates constituted “significant . . . indicia of their independent business 

status under part C” of N.J.S.A. 43:21-19(i)(6). Id. at 152.

We affirm in part and reverse in part the Appellate Division’s judgment. 

We affirm as to the five entities found to be employees and reverse the court’s 

determination as to the other eleven workers. The Commissioner’s finding

that East Bay did not supply sufficient information to prove the workers’

independence under the ABC test’s prong C was not arbitrary, capricious, or 

unreasonable, but rather was supported by the absence of record evidence as to 
4

that part of the test. In this light, we are satisfied that all sixteen workers in 

question are properly classified as employees, and we remand to the 

Department for calculation of the appropriate back-owed contributions.

I.

A.

East Bay is a drywall installation business operating in Stone Harbor, 

Avalon, and Sea Isle, New Jersey. East Bay’s principal, Benjamin DeScala,

testified before the ALJ. He explained that ninety percent of East Bay’s work 

consists of drywalling residential homes. According to DeScala, East Bay gets 

its business by communicating with builders who are already in the process of 

constructing homes. East Bay thereafter hires workers to complete the drywall 

installation, taping, and finishing on a per-job basis. 

Once a builder accepts East Bay’s bid for a particular project, East Bay 

contacts workers -- whom it alleges to be subcontractors -- to see who is 

available. Workers are free to accept or decline East Bay’s offer of 

employment, and some workers have left mid-installation if they found a better 

job. DeScala testified some of his workers told him that they worked for 

businesses aside from East Bay. DeScala admitted, however, that he did not 

produce any evidence to support that claim. When asked why he did not 
5

produce such evidence during the audit, DeScala responded: “I don’t recall 

being asked.”

DeScala testified that East Bay deals with and hires all its workers in the 

same manner. Before employing a worker, DeScala requests an up-to-date 

certificate of liability insurance and tax identification numbers to ensure the 

worker is an independent entity. Sometimes, he asks other contractors about 

the worker’s experience and quality of work. DeScala testified he decides the 

rate of pay for each worker and does not pay the worker until the job is done to 

his satisfaction. DeScala made clear that he documents the workers’

compensation via an Internal Revenue Service Form 1099.

East Bay provides the workers with the raw materials necessary to 

complete the drywall installation. The workers perform the labor but must 

provide their own tools and arrange for their own transportation to the 

worksites. East Bay does not dictate who or how many laborers the workers 

must hire to complete the project. Although East Bay does not direct how the

workers install drywall, DeScala made clear East Bay remains responsible for 

the finished product. DeScala testified that he inspects the drywalling after the 

workers are finished and “[i]f the work doesn’t come out good [he has] to hire 

another subcontractor to come fix it.”
6

B.

On June 30, 2013, East Bay, a business registered as an employer up to 

that point, ceased reporting wages to the Department. Consequently, Jesse 

Handler, an auditor for the Department, conducted a status audit to “determine 

[whether East Bay] should be registered as an employer or if [it was] correctly 

not registered as an employer.”1 The audit reviewed the workers East Bay 

hired between 2013 and 2016 to determine whether they were independent 

contractors, as defined by the ABC test, or employees of East Bay, requiring

the employer to contribute to the unemployment compensation and temporary 

disability funds.

On January 17, 2017, Handler sent a letter to East Bay apprising it of the 

forthcoming audit. On January 31, Handler met with DeScala and Keating 

Weinberger, East Bay’s certified public accountant, to discuss how East Bay 

obtains its customers and operates its business. 

Handler thereafter sent non-certified letters to each of East Bay’s alleged

subcontractors, requesting copies of their income tax returns, IRS Form 1040 

Schedule Cs, business cards, invoices, letterheads, advertisements, and 

1

 According to Handler, “[a] status audit is issued on an employer or entity 

that is not currently registered to determine if they should be registered as an 

employer. . . . A registered employer is an entity that has employees.”
7

business insurance. He sought this documentation to determine whether the 

workers would be able to show that their businesses were independent entities. 

When a worker did not answer, Handler requested forwarding address 

information from the postmaster of the relevant county. Several workers did 

not leave forwarding addresses, and some simply did not respond.

Handler found that approximately half of the alleged subcontractors 

working for East Bay between 2013 and 2016 should have been classified as 

employees. He determined a total of sixteen alleged subcontractors were nonbona fide: four individuals and twelve business entities.2

 

When Handler informed East Bay of his findings, East Bay forwarded

several documents purporting to show that some of the business entities 

Handler deemed non-bona fide were actual independent business entities. 

Those documents included business entity registration information from the 

New Jersey Business Gateway Business Entity Information and Records 

Service and active certificates of insurance. This information showed that,

although several of the entities were registered as corporations during the audit 

2

 The four individuals are Ami Serra, Dennis Serra, Kyle Cuevas, and Dan 

Martin. The twelve business entities are Force 1 Drywall, LLC; A&B 

Builders, LLC; Arce Drywall, LLC; Caslo Drywall; Eligio Drywall; JEC 

Construction; AMA Construction; High Quality Builders; Quick Carpentry;

Three State Drywall; Simple Construction; and Serra Drywall.
8

period, many were delinquent in their filings while working for East Bay. 

Handler informed East Bay that the documents “did not affect the audit at this 

time however I have included them in the audit file.” 

In a letter dated June 13, 2017, the Department informed East Bay that it 

owed $42,120.79 in unpaid unemployment and temporary disability 

contributions. East Bay contested the results of the audit and requested a full 

hearing in the Office of Administrative Law.

II.

A.

The ALJ conducted evidentiary hearings on February 28 and March 7, 

2019. A “non-attorney representative” appeared for the Department. He

emphasized that the evidence would prove the payments East Bay made to 

these alleged subcontractors were in reality payments to corporations in name 

only. The Department’s representative claimed the evidence would prove 

these “alleged corporations and LLCs . . . were not in good standing with the 

State of New Jersey.” 

In response, East Bay’s attorney argued the workers at issue here were 

independent business entities, not employees, and East Bay’s business model 

was consistent with an independent contractor relationship. 
9

The ALJ heard testimony from Handler and DeScala and ultimately 

found DeScala’s testimony credible. Conversely, the ALJ did not make any

credibility assessment of Handler’s testimony.

On July 15, 2019, the ALJ issued an Initial Decision affirming the 

results of the Department’s audit for three workers and reversing the audit 

classification of the thirteen remaining entities. The ALJ applied the threepronged ABC test, which “analyzes whether the individuals are under the 

direction and control of the employer, whether the work is outside of the usual 

course of business for which such service was performed, and finally, whether 

such individual is customarily engaged in an independently established trade, 

occupation, profession or business.” See N.J.S.A. 43:21-19(i)(6). 

Applying the ABC test, the ALJ found most of the workers satisfied 

prongs A and B. With respect to prong C, the ALJ held that the remaining 

thirteen workers met the requirements of prong C because they each existed 

independently from their relationship with East Bay. The ALJ found the 

business entity registration information demonstrated those entities were 

lasting and stable and could continue to operate past the termination of their 

relationships with East Bay.

The ALJ concluded that Dan Martin, Ami Serra, and Kyle Cuevas did 

not satisfy the ABC test. Dan Martin did not satisfy prong B because he 

---
10

lacked other sources of income; Ami Serra did not satisfy prong C because he 

did not operate a business; and Kyle Cuevas “failed” the test because East Bay 

did not provide any evidence that he was an independent contractor. Based on 

these findings, the ALJ affirmed the auditor’s conclusions that these three were

employees and East Bay was required to make unemployment and temporary 

disability contributions on their behalf. 

B.

The Commissioner of the Department is responsible to conduct the final 

agency review and is authorized to make the final agency determination in this 

matter. The Commissioner affirmed the ALJ’s decision regarding the three 

individuals classified as employees under the ABC test. The Commissioner 

rejected the ALJ’s conclusion as to the other thirteen entities, however, and 

found that all sixteen workers were in fact employees of East Bay during the 

relevant time period.

First, the Commissioner found that every worker failed prong A because 

East Bay set the terms of work and failed prong B because the workers’ labor

was not outside East Bay’s places of business. Finally, the Commissioner held 

that all the workers failed prong C because East Bay did not supply sufficient 

information showing that the workers existed independent of East Bay.
11

The Commissioner elaborated that prong C requires the workers’

businesses to persist after the end of the employment relationship. Here, the 

Commissioner noted no evidence was submitted showing the entities “had 

properly maintained their corporate status while performing services for and 

receiving payment from East Bay during the audit period.” Furthermore, the 

Commissioner noted that the ALJ did not discuss the pertinent factors and 

found that East Bay failed to present sufficient evidence to prove prong C.

Consequently, the Commissioner found that all sixteen workers were 

East Bay’s employees and reinstated the auditor’s findings. 

C.

Pursuant to Rule 2:2-3(a)(2), East Bay appealed the Commissioner’s 

decision to the Appellate Division. The Appellate Division affirmed in part 

and reversed in part the Commissioner’s final determination. 467 N.J. Super. 

at 140. As to prong A, the Appellate Division agreed with the ALJ’s 

determination that East Bay did not control the workers. Id. at 150. Regarding 

prong B, the Appellate Division also agreed with the ALJ, noting that places of 

business are only “those locations where the enterprise has a physical plant or 

conducts an integral part of its business.” Id. at 151 (quoting Carpet Remnant 

Warehouse, Inc. v. Dep’t of Labor, 125 N.J. 567, 592 (1991)). 
12

With respect to prong C, the Appellate Division agreed with the 

Commissioner that five of the sixteen alleged subcontractors failed to show 

they actually operated as independent business entities. Id. at 150-52. The 

Appellate Division, however, parted ways with the Commissioner regarding 

the other eleven entities. Id. at 152. The appellate court found the 

Commissioner specifically analyzed only two entities, while generally 

referring to the others. Ibid. The Appellate Division noted the supplied 

certificates of insurance were “significant, albeit not necessarily dispositive, 

indicia of their independent business status under part C.” Ibid. In the view of 

the Appellate Division, the fact that these entities all ceased to exist after 2016 

was not determinative because those companies may very well have operated 

independent businesses up until the end of 2016. Ibid. 

The Appellate Division thus affirmed the Commissioner’s findings with 

regard to Dan Martin, Ami Serra, Kyle Cuevas, JEC Construction, and Caslo 

Drywall Corporation. Id. at 152. As to the remaining eleven entities, the 

appellate court reversed and remanded the matter for a recalculation of 

unemployment and temporary disability contributions owed by East Bay. Id.

at 152-53.

This Court granted the Department’s petition for certification. 248 N.J. 

400 (2021). We also granted leave to appear as amici curiae to the National 
13

Employment Lawyers Association of New Jersey (NELA) and to the New 

Jersey Civil Justice Institute (NJCJI). 

III.

A.

Before this Court, the Department argues the Appellate Division made 

four errors in reversing the Commissioner’s ruling. First, the Department 

asserts that the Appellate Division misapplied prong C by not considering the 

factors laid out in Carpet Remnant, 125 N.J. at 592-93. Second, the 

Department maintains that the Appellate Division imposed a “burdensome

standard” on the Commissioner by requiring him to list the findings for every 

business, even where the businesses all fall into the same category. Third, the

Department argues the Appellate Division misconstrued prong B of the ABC 

test by concluding that East Bay did not perform an integral part of business at 

its work sites. Finally, the Department argues that the Appellate Division 

misinterpreted the Commissioner’s statements regarding the application of the 

ABC test to sole proprietorships.

Amicus NELA generally supports the Department’s argument but limits 

its position to two issues. First, it argues that the Appellate Division erred in 

holding that East Bay’s workers performed services outside all the places of 

East Bay’s business under prong B. Second, NELA avers that the Appellate 
14

Division erred in its prong C analysis by relying solely on the business entity 

information and incorporation status of East Bay’s workers.

B.

Conversely, East Bay vehemently disagrees with the Department’s 

characterization of the Appellate Division’s judgment and maintains that the 

appellate court correctly decided the issues raised here. East Bay asserts that 

the Appellate Division appropriately applied the ABC test and urges this Court 

to affirm its decision.

Amicus NJCJI supports East Bay’s position and asks this Court to affirm 

the Appellate Division decision. Specifically, NJCJI argues that remote work 

sites cannot constitute part of an employer’s places of business under prong B 

unless the employer regularly uses the same locations and exercises a degree 

of ongoing control over them. NJCJI also asserts that this Court should 

provide greater guidance on the standard of proof employers must provide to 

satisfy prong C.

IV.

A.

We review a decision made by an administrative agency entrusted to 

apply and enforce a statutory scheme under an enhanced deferential standard.

Hargrove v. Sleepy’s, LLC, 220 N.J. 289, 301-02 (2015). We are bound to 
15

defer to the agency’s factual findings if those conclusions are supported by the 

record. Carpet Remnant, 125 N.J. at 587. And “[w]e will defer to an agency’s 

interpretation of both a statute and implementing regulation, within the sphere 

of the agency’s authority, unless the interpretation is ‘plainly unreasonable.’” 

In re Election L. Enf’t Comm’n Advisory Op. No. 01-2008, 201 N.J. 254, 262 

(2010) (quoting Reilly v. AAA Mid-Atl. Ins. Co. of N.J., 194 N.J. 474, 485 

(2008)). “This deference comes from the understanding that a state agency 

brings experience and specialized knowledge to its task of administering and 

regulating a legislative enactment within its field of expertise.” Ibid. 

Generally, courts review the decision of a public agency to determine 

whether it was “arbitrary, capricious, or unreasonable, or . . . lack[ed] fair 

support in the record.” Allstars Auto Grp., Inc. v. Motor Vehicle Comm’n, 

234 N.J. 150, 157 (2018) (quoting Russo v. Bd. of Trs., PFRS, 206 N.J. 14, 27 

(2011)). Under that standard, the reviewing court considers

(1) whether the agency’s action violates express or 

implied legislative policies, that is, did the agency 

follow the law; 

(2) whether the record contains substantial evidence to 

support the findings on which the agency based its 

action; and

(3) whether in applying the legislative policies to the 

facts, the agency clearly erred in reaching a conclusion 

that could not reasonably have been made on a showing 

of the relevant factors.
16

[Id. at 157-58 (quoting In re Stallworth, 208 N.J. 182, 

194 (2011)).] 

B.

The Unemployment Compensation Law (UCL), N.J.S.A. 43:21-1 to -71, 

was designed to act as a cushion “against the shocks and rigors of

unemployment.” Carpet Remnant, 125 N.J. at 581 (quoting Provident Inst. for 

Sav. in Jersey City v. Div. of Emp. Sec., 32 N.J. 585, 590 (1960)). “Because 

the statute is remedial, its provisions have been construed liberally, permitting 

a statutory employer-employee relationship to be found even though that 

relationship may not satisfy common-law principles [of employment].” Carpet 

Remnant, 125 N.J. at 581. The UCL requires that employers and employees 

make contributions to the unemployment compensation and temporary

disability benefit funds. Those contributions come from “a specified 

percentage of the employee’s wages.” Id. at 582 (citing N.J.S.A. 43:21-7). An 

employer’s contributions are due once the employer pays the employee. 

N.J.A.C. 12:16-5.1(a).

In this context, a finding of employee status under the UCL “has two 

significant consequences.” Carpet Remnant, 125 N.J. at 582. “First, the 

employer and the employee must” make contributions to the unemployment

and temporary disability funds. Ibid. (citing N.J.S.A. 43:21-7). And second, 
17

the employee will be eligible to collect unemployment benefits should the 

worker be discharged from employment and otherwise qualify. Ibid. (citing

N.J.S.A. 43:21-4 and -5). 

N.J.S.A. 43:21-19(i)(1)(A) defines employment as “[a]ny service . . . 

performed for remuneration or under any contract of hire, written or oral, 

express or implied.” But, even if a worker receives compensation for work 

performed, the worker will not be considered an employee if the ABC test is 

satisfied. See id. § 19(i)(6). In that case, the worker is an independent 

contractor, and the employer need not contribute to the unemployment or 

temporary disability funds on the worker’s behalf. 

The text of the statute that established the ABC test reads as follows:

Services performed by an individual for remuneration 

shall be deemed to be employment . . . unless and until 

it is shown to the satisfaction of the division that: 

(A) Such individual has been and will continue to 

be free from control or direction over the 

performance of such service, both under his contract 

of service and in fact; and

(B) Such service is either outside the usual course 

of the business for which such service is performed, 

or that such service is performed outside of all the 

places of business of the enterprise for which such 

service is performed; and

(C) Such individual is customarily engaged in an 

independently established trade, occupation, 

profession or business.

------
18

[Ibid.]

The ABC test is conjunctive; thus, all three prongs must be satisfied for 

a worker to be considered an independent contractor. Schomp v. Fuller Brush

Co., 124 N.J.L. 487, 489 (Sup. Ct. 1940). The ABC test presumes a worker is 

an employee, Hargrove, 220 N.J. at 305, and if the record fails to establish any 

one prong, the Department must deem the worker an employee, Schomp, 124 

N.J.L. at 489. The party challenging the Division’s classification carries the 

burden to “establish the existence of all three criteria of the ABC test.” Carpet 

Remnant, 125 N.J. at 581.

Whether a worker is an employee under the ABC test “is fact-sensitive, 

requiring an evaluation in each case of the substance, not the form, of the 

relationship.” Ibid. The factfinder must look beyond the employment contract 

and the payment method to determine the true nature of the relationship. See 

Phila. Newspapers Inc. v. Bd. of Rev., 397 N.J. Super. 309, 320 (App. Div. 

2007) (finding that a newspaper salesman was an employee even though his 

employment contract explicitly classified him as an independent contractor and 

he received an IRS Form 1099).

C.

East Bay does not challenge the Appellate Division’s judgment 

affirming that Dan Martin, Ami Serra, Kyle Cuevas, JEC Construction, and 
19

Caslo Drywall are properly classified as employees. Because we are 

convinced East Bay did not supply sufficient information to satisfy its prong C 

burden regarding the remaining eleven entities, we need not analyze prongs A 

and B.3 

1.

Prong C “provides the closest connection between the obligation to pay 

taxes and the eligibility for benefits.” Carpet Remnant, 125 N.J. at 589. The 

thrust of prong C broadly asks whether a worker can maintain a business 

independent of and apart from the employer. See Gilchrist v. Div. of Emp. 

Sec., 48 N.J. Super. 147, 158 (App. Div. 1957). Indeed, “the [prong] C 

standard is satisfied when a person has a business, trade, occupation, or 

profession that will clearly continue despite termination of the challenged 

relationship.” Carpet Remnant, 125 N.J. at 586 (citing Trauma Nurses, Inc. v. 

3

 Prong B of the ABC test requires the entity’s work to be “outside the usual 

course of the business” or “outside of all the places of business” of the 

potential employer. N.J.S.A. 43:21-19(i)(6)(C). In Carpet Remnant, this 

Court declined to define the term “usual course of the business.” 125 N.J. at 

584-85. Furthermore, we held “the places of business of the enterprise” are 

limited to “only . . . those locations where the enterprise has a physical plant or 

conducts an integral part of its business.” Id. at 592. We suggest the 

Department exercise its statutory authority and expertise, particularly in light 

of the prevalence of remote work today, to promulgate regulations clarifying 

where an enterprise “conducts an integral part of its business” and what 

constitutes the “usual course of the business.” See N.J.S.A. 43:21-7g; 

N.J.A.C. 12:71-1.3.
20

Dep’t of Lab., 242 N.J. Super. 135, 148 (App. Div. 1990)). It must be “stable 

and lasting,” capable of “surviv[ing] the termination of the relationship.” 

Gilchrist, 48 N.J. Super. at 158. If the worker “would join the ranks of the 

unemployed” when the relationship ends, the worker cannot be considered 

independent under prong C. Carpet Remnant, 125 N.J. at 585-86; see also

Schomp, 124 N.J.L. at 491-92.

In some cases, it will be obvious that a worker was entirely dependent 

upon an employer because, when the working relationship ends, the worker is 

fully unemployed. See Schomp, 124 N.J.L. at 491 (holding that a door-to-door 

salesman was not independent under prong C because “when the agreement

between these parties was terminated the claimant joined the ranks of the 

unemployed”); Phila. Newspapers, 397 N.J. Super. at 323 (holding that a 

subcontractor delivering newspapers failed prong C because he never 

advertised himself as a newspaper delivery person; he never ran a newspaper 

delivery business; and he “joined the ranks of the unemployed” after the 

business relationship ceased); Steel Pier Amusement Co. v. Unemp. Comp. 

Comm’n, 127 N.J.L. 154, 157 (1941) (holding that musicians working for an 

amusement park were not independent under prong C because they were 

employed solely by the park for a set period of time).
21

In other cases -- where it is not as clear that the worker will be 

unemployed without the working relationship -- other factors may be 

illustrative of the underlying public policy at stake. For example, this Court has 

provided several factors to be considered when evaluating a worker’s “ability 

to maintain an independent business,” including

the duration and strength of the [workers’] businesses, 

the number of customers and their respective volume of 

business, the number of employees, . . . the extent of 

the [workers’] tools, equipment, vehicles, and similar 

resources [and] . . . the amount of remuneration each 

[worker] received from [the employer] compared to 

that received from other [employers]. 

[Carpet Remnant, 125 N.J. at 592-93.]

Those prong C factors themselves are just pieces of the puzzle, factors 

that can illuminate whether a worker has a truly independent business. 

Further, New Jersey courts have looked to other factors to determine a 

worker’s independence under prong C. In Gilchrist, for instance, the Appellate 

Division considered whether door-to-door salesmen operated business 

establishments; whether they maintained telephone listings or business 

stationery; who possessed the inventory; who bore the risk of loss; and who 

benefitted from the goodwill that the company generated. 48 N.J. Super. at

158-59. In Trauma Nurses, the Appellate Division considered whether nurses 

assigned to temporary positions were required to maintain their own
22

educational and licensure requirements, whether they could obtain other fullor part-time positions, and whether they worked for other agencies or 

hospitals. 242 N.J. Super. at 137, 148.

2.

In the instant case, East Bay asserts Descala’s testimony is “[t]he best 

evidence supporting” prong C. DeScala testified that he believed the 

subcontractors worked for other contractors, that sometimes a subcontractor 

would leave the job before it was completed, and that the subcontractors were 

free to accept or decline work. Further, East Bay provided certificates of 

insurance and business entity registration information for most of the disputed 

entities. We now hold this information is insufficient to prove the entities’ 

independence. 

First, generally speaking and subject to personal contractual obligations,

even wholly dependent employees may choose to work for more than one 

employer or abruptly resign from their position. See Pierce v. Ortho Pharm.

Corp., 84 N.J. 58, 65-66 (1980). But the probative value of refusal to accept or 

complete work is limited because, like an employee, even a bona-fide 

independent contractor is not free from the pressure to accept a job. Logic 

dictates that a subcontractor who consistently declines the call to work would 

soon have a silent phone. 
23

Second, a certificate of insurance could be a significant indication of 

independence because an employer is generally “not vicariously liable for the 

negligent acts of the contractor in the performance of the contract,” Puckrein 

v. ATI Transp., Inc., 186 N.J. 563, 574 (2006) (citing Bahrle v. Exxon Corp., 

145 N.J. 144, 156 (1996)), and insurance policies issued to employers often 

exclude coverage for the acts of independent contractors, see, e.g., Sahli v. 

Woodbine Bd. of Educ., 193 N.J. 309, 322 (2008). Business registration 

information may bolster this inference, particularly if the registration 

demonstrates a complex ownership structure and continues in force beyond the 

business relationship in question. 

Here, however, these documents do not elucidate whether the disputed 

entities were engaged in independent businesses separate and apart from East 

Bay. For most entities, insurance certificates were provided showing coverage 

for only one year of the audit period. Further, all but one of the business

registrations reveal a sole individual in the ownership structure of each entity,

and nearly all the registrations were revoked prior to the audit due to a failure 

to file the required reports for at least two consecutive years. At best, this 

information indicates the entities might have operated independently of East 

Bay. At worst, this information shows the entities were a business in name 
24

only. In any event, a business might be duly registered but entirely dependent 

upon one contractor.

In sum, the case at hand presents one of those less-obvious situations of 

whether the workers are truly independent business entities. Thus, consideration 

of the prong C factors described in Carpet Remnant, Gilchrist, and Trauma 

Nurses is appropriate. But, in attempting to meet its burden, East Bay has 

provided little or no documentary evidence to address those factors. For 

example, East Bay has not provided evidence that the entities maintained 

independent business locations, advertised, or had employees. Further, despite 

the Department’s request, none of the entities at issue provided information 

sufficient to demonstrate their independence. 

The Commissioner found that DeScala’s testimony, the business 

registration information, and the certificates of insurance were insufficient to 

prove independence. The Commissioner specifically noted that

[t]he “business entity information” relied on so heavily 

by petitioner and the ALJ falls woefully short of 

meeting the standard enumerated in Carpet 

Remnant . . . . That is, it does not address the following 

factors with regard to each “drywall subcontractor”:

the duration and strength of the business, the number of 

customers and their respective volume of business, or 

the number of employees; nor does it address the 

amount of remuneration each “drywall subcontractor”

received from East Bay compared to that received from 

others for the same services.
25

Because the record contains no information regarding those hallmarks of 

independence discussed above, we find that the Commissioner’s final decision

was not arbitrary, capricious, or unreasonable, and we defer to that agency 

decision. See Carpet Remnant, 125 N.J. at 587.

The Legislature made clear that the public policy underpinning the UCL 

must be considered when determining its application.

As a guide to the interpretation and application of this 

chapter, the public policy of this state is declared to be 

as follows: economic insecurity due to unemployment 

is a serious menace to the health, morals, and welfare 

of the people of this state. . . . The achievement of 

social security requires protection against this greatest 

hazard of our economic life. This can be provided by 

encouraging employers to provide more stable 

employment and by the systematic accumulation of 

funds during periods of employment to provide benefits 

for periods of unemployment, thus maintaining 

purchasing power and limiting the serious social 

consequences of poor relief assistance.

[N.J.S.A. 43:21- 2 (emphasis added).]

A business practice that requires workers to assume the appearance of an 

independent business entity -- a company in name only -- could give rise to an 

inference that such a practice was intended to obscure the employer’s 

responsibility to remit its fund contributions as mandated by the State’s 

employee protections statutes. That type of subterfuge is particularly 

damaging in the construction context, where workers may be less likely to be
26

familiar with the public policy protections afforded by the ABC test and

consequently particularly vulnerable to the manipulation of the laws intended 

to protect all employees.4 Such a business practice also undermines the public 

policy codified in the UCL. 

We thus conclude each entity at issue fails prong C of the ABC test and 

is therefore properly classified as an employee. 

V.

The judgment of the Appellate Division is affirmed in part and reversed

in part, and the matter is remanded to the Department for proceedings 

consistent with this opinion.

CHIEF JUSTICE RABNER and JUSTICES PATTERSON, SOLOMON, 

and PIERRE-LOUIS join in JUDGE FUENTES’s opinion.

4 See State of N.J., https://nj.gov (using “Search” feature, enter “construction 

workers”) (last visited July 20, 2022) (providing links to descriptions of 

statewide investigations conducted by the Department that revealed employees 

being misclassified by their employers as independent contractors, resulting in 

underpayment of the employees); see also Report of Gov. Murphy’s Task 

Force on Employee Misclassification 1, 6 (2019) (available at 

https://www.nj.gov/labor/assets/PDFs/Misclassification%20Report%202019.p

df) (“[M]isclassification is widespread and especially prevalent in construction

. . . and other labor-intensive low-wage sectors, where employers can gain a 

competitive advantage by driving down payroll costs.”).