Article

Conscientious Employee Protection Act (CEPA)
Includes "Independent Contractors"

by Robert J. Hagerty, Esq.

In two recent cases, Stomel v. City of Camden, 2007 N.J. LEXIS 909 (2007) and D'Annunnzio v. Prudential Ins. Co., 2007 LEXIS 910, the New Jersey Supreme Court extended CEPA protection to persons who appeared to be independent contractors.

In Stomel, the court determined whether a municipal public defender may be an "employee" of the City of Camden for purposes of advancing a claim under New Jersey's Conscientious Employee Protection Act ("CEPA"). In D'Annunnzio, the question was whether a chiropractic medical director who was designated by Prudential as an "independent contractor" was an employee for the purposes of CEPA.

The plaintiff, Elliot Stomel, had been a public defender for the City of Camden for seventeen years as of 1999 when he testified as a witness for the United States government in a political corruption trial of Camden's prosecutor. During his testimony against the prosecutor, Stomel implicated Camden's Mayor, Milton Milan, as being involved in unlawful activity. The case ended in a mistrial and shortly thereafter Stomel was removed as Camden's municipal public defender.

In response, Stomel filed a suit against the City alleging that his removal from the public defender office was in retaliation for "whistleblowing" in violation of CEPA. Stomel had served part-time as Camden's municipal public defender from 1982 until 1999. During this time, he had several written agreements that were not consistent in nature. He had worked without a contract, under one-year contracts, and under an arrangement with the municipal court's administrator that paid him a monthly rate. Throughout his entire service, he was paid a flat monthly fee for his representation. His last contract with the City ran from November 1, 1997 through October of 1998. Stomel continued to operate under the terms of this contract until his removal in December of 1999.

The court applied a twelve-factor test in determining whether Stomel was an independent contractor:

(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; (12) the intention of the parties.

In Stomel's case: (1) the City was required to provide a public defender; (2) fStomel's employment required him to represent clients the City provided him with; (3) he was paid by the City with a monthly check based on a yearly salary; (4) the fact that the City chose to provide him with a 1099 form, rather than a W-2 was not controlling; (5) he performed the same duties for the City for seventeen years; (6) he was not free to choose his own clients; (7) he was required to submit written reports detailing his court sessions and duties performed; (8) he could not be paid, pursuant to his contract. Until the City Law Department certified that his work was done satisfactorily; and (9) the municipal court made appointments for indigent persons to meet with him.

In D'Annunnzio, the plaintiff, a chiropractic medical director: (1) was designated by Prudential as an "independent contractor"; (2) was required to maintain a private professional practice; (3) agreed that his hours billed to Prudential would not exceed fifty percent of his total professional practice; (4) executed a one-year "Consultant Agreement" in the name of his professional association rather than as a licensed individual; (5) worked from 8:00 a.m. to noon in Prudential's offices Monday through Friday; (6) was paid by Prudential for twenty hours of work per week; (7) received a list of duties, workflow instructions, and a time sheet; and (8) was given a workspace, Prudential phone number and e-mail address, an office mailbox, and office supplies and received training by Prudential, was an employee for purposes of CEPA.

CEPA defines an employee as "any individual who performs services for and under the control and direction of an employer for wages or other remuneration." The court found that there are three considerations that "must come into play" when deciding whether an individual is an employee or an independent contractor. They are: "(1) employer control; (2) the worker's economic dependence on the work relationship; and (3) the degree to which there has been a functional integration of the employer's business with that of the person doing the work at issue."

The court placed great emphasis on the control exerted by Prudential over D'Annunzio as well as how essential and integral the nature of D'Annunzio's treatment plan review function was to Prudential's operations. It also noted that D'Annunzio's time spent at Prudential was both substantial and continuous. Taking this all into consideration, the court found that D'Annunzio was an employee for purposes of CEPA.

These two cases should make employers review their "independent contractor" arrangements to determine whether they are truly independent, and not employees in disguise.