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Moskowitz, Rowland article, “NJ DOL Takes Aim at the Independent Contractor Model of Business” publishes in Sobel & Co. Points of Fact newsletter, September 2019

Brown Moskowitz & Kallen partners Kenneth L. Moskowitz and Steven R. Rowland recently collaborated on an article that published in the 2019 “Points of Fact” newsletter produced by certified public accounting and consulting firm Sobel & Co. The article focuses on the New Jersey Department of Labor & Workforce Development’s July 2019 task force report that maintains “misclassification of employees as independent contractors is prevalent. The article notes that “anyone who classifies or who has classified workers as independent contractors should understand they now have additional audit exposure.” Here is the full article:


By Kenneth L. Moskowitz, Esq. and Steven R. Rowland, Esq.
Brown Moskowitz & Kallen, P.C.

On July 19, 2019, the New Jersey Department of Labor and Workforce Development (“DOL” or “Department”) issued a task force report which concludes that misclassification — classifying “employees” as “independent contractors” — appears to be “prevalent” in numerous industries including “construction, janitorial services, home care, transportation, trucking and delivery services, and other labor-intensive low-wage sectors, where employers can gain a competitive advantage by driving down payroll costs.” The task force made numerous recommendations to deter misclassification, including the threat of criminal prosecution of those who misclassify, and the revocation/suspension of their business licenses.

In light of the DOL’s task force report and enforcement initiatives, businesses that rely on independent contractors must be cognizant that DOL enforces the state unemployment compensation system, including its taxation provisions. Accordingly, due to the Department’s administration of state employment taxes, putative employers must pay careful attention to the State’s efforts to expand the classification of who is an “employee” — for whom the employer must pay the state unemployment tax — rather than “independent contractors” — who are outside its coverage and for whom no state unemployment tax is owed. Audit risk is very real and can result in crushing liability. To make matters worse — indeed much worse — the DOL in its audits is not only now applying a broader definition of “employment” than it previously had, but is applying the broader definition retroactively.

By way of background, in December 2017, at the close of the Christie administration, the DOL Commissioner issued a final determination in Big Daddy Drayage, Inc. v. Department of Labor and Workforce Development (a matter prosecuted by BMK on behalf of the petitioner) that confirmed the Department’s obligation to apply the IRS’s 20 factor, common law test of employment in an employment tax audit of a motor carrier, as statutorily required by N.J.S.A. 43:21-19(i)(7)(X) and implemented by regulation, N.J.A.C. 12:16-23.2(a)(4). The Big Daddy case is significant because the Commissioner acknowledged that there are different tests of employment and that, with respect to state unemployment taxes, some work relationships are covered by one rule — the common law test of employment — and others by New Jersey’s statutory ABC Test. Notably, the common law test of employment, if properly applied, should result in a determination that an owner-operator that leases its large truck to a motor carrier is an independent contractor as the Commissioner found in Big Daddy — resulting in the overturning of an employment tax assessment that, with interest, was approximately $500,000. Since the common law test of employment is also used by the IRS, the independent contractor model is widely used in interstate trucking, and may fairly be described as the backbone of that industry.

The ABC Test, on the other hand, potentially can be read in the same context to find that the owner-operator is an employee, and its application was urged by the DOL in Big Daddy notwithstanding the aforementioned statute and regulation. In making the assessment against Big Daddy, the DOL had applied the ABC Test. Under the ABC Test as interpreted by the Department, a worker is deemed to be an employee simply because he/she receives the bulk of his earnings from a single source and, consequently, is considered to be economically dependent on that party and, therefore, employed by it. The DOL is, by statute, generally supposed to apply the ABC Test in unemployment tax audits, except where the state legislature has chosen otherwise — such as for large trucks leased to motor carriers and the laundry-list of other exceptions set forth at N.J.S.A. 43:21-19(i)(7)(A-Z) (and elsewhere), which include real estate brokers, court reporters, travel agents and approximately two dozen other work categories. The central issue in Big Daddy was DOL’s failure to apply the exception to the ABC Test.
What is significant about Big Daddy is that the Commissioner recognized the statutory dichotomy and the DOL’s obligation to enforce each test faithfully. In the decision, the Department recognized that it was responsible to determine whether or not the owner-operators were “employees” under the common law standard used by IRS and expressly incorporated by the State of New Jersey in N.J.A.C. 12:16-23.2(a)(4) where the statutory test of employment, the more stringent ABC Test, did not apply. In doing so, the Commissioner rejected the DOL’s argument that only the IRS could apply the common law standard.

Under Governor Murphy, the DOL repealed N.J.A.C. 12:16-23.2(a)(4) effective September 2018, and now applies the ABC Test even where the work category is statutorily excepted. In the rule-making that resulted in the repeal of the regulation, the DOL took the position that, because N.J.A.C. 12:16-23.2(a)(4) required the application of the federal standard of employment, it could not apply it: the exact opposite position that the former DOL Commissioner took in Big Daddy. The legality/validity of the repeal is now the subject of litigation in the Appellate Division in Farruggio’s Bristol and Philadelphia Auto Express, Inc. v. New Jersey Department of Labor and Workforce Development, Appellate Division Docket No. A-4932-18.

For better of worse, the current audit environment reflects the DOL’s view that the independent contractor model is inherently abusive and denies the state payroll tax revenue. Indeed, in current audits, not only does the DOL assert that it cannot apply IRS’s common law test of employment because N.J.A.C. 12:16-23.2(a)(4) has been repealed, but it is now applying the more stringent ABC Test standard retroactively.

The DOL under Governor Murphy has changed course, and its repeal of N.J.A.C. 12:16-23.2(a)(4) reflects a stark reality: if you are audited, the DOL will apply the ABC Test (regardless of whether you are supposed to be excepted from it) and then will almost certainly find the worker to be an “employee” rather than an “independent contractor.” Simply put — for anyone who has previously classified a worker to be an independent contractor, a DOL audit may result in an assessment, requiring the payment of state unemployment tax for those who were classified as independent contractors, as well as statutory interest.

Anyone who classifies or who has classified workers as independent contractors should understand that they now have additional audit exposure and ought to take steps to minimize it. In particular, such a company should consult and work with accountants and/or attorneys who have experience in responding to DOL audits. There are practices that the company may now be using with independent contractors that may be considered to be the type of red-flag conduct that the DOL deems to be indicative of employment. Additionally, there may be steps that you can take with IRS — such as the SS-8 process — that may benefit you in a subsequent DOL audit. Also, risk may be mitigated/avoided by contracting with workers who are either S or C corporations, as opposed to sole proprietorships or LLCs.

In light of the DOL’s forceful initiative and the repeal of N.J.A.C. 12:16-23.2(a)(4), a company that engages independent contractors should assess the propriety of doing so and, perhaps more importantly, the risk of a DOL audit in the current environment. With the aid of experienced accountants and legal counsel, a company that utilizes independent contractors in its business can assess the risks of continuing to do so and take actions that potentially may mitigate those risks.
©Copyright 2019, Brown Moskowitz & Kallen, P.C. All rights reserved. This article is for informational purposes only and is not intended to constitute, and does not constitute, legal advice.

For further information please feel free to contact either Kenneth L. Moskowitz, Esq. (klm@bmk-law.com) or Steven R. Rowland, Esq. (srowland@bmk-law.com), or call either at 973-376-0909.

Mr. Moskowitz is a former prosecutor and is a founding partner of Brown Moskowitz & Kallen, P.C., in Summit New Jersey. He represents clients in diverse business disputes, commercial litigation, internal investigations, “corporate divorce” matters, insurance coverage litigation and other business related disputes.

Mr. Rowland is a litigation partner at Brown Moskowitz & Kallen, P.C. He represents corporate clients in complex litigation matters including business disputes, commercial litigation, insurance coverage, and construction. Mr. Rowland represented Big Daddy Drayage, Inc. and obtained the December 2017 final determination from DOL that IRS’s 20 factor test provided the standard for employment determinations under New Jersey’s unemployment statute pursuant to N.J.A.C. 12:16-23.2(a)(4). In addition, he represents Farruggio’s Express, which has challenged the repeal of N.J.A.C. 12:16-23.2(a)(4) as well as DOL’s retroactive application of that repeal in a matter now pending before the Appellate Division in Farruggio’s Bristol and Philadelphia Auto Express v. Department of Labor and Workforce Development, Appellate Division Docket No. 4932-18.

Oct 08, 2019

BM&K Hosts Breakfast Seminar for Financial Professionals with Economists Weinberg, O’Sullivan

Brown Moskowitz & Kallen Hosts Client Briefing with Economists Weinberg, O’Sullivan The podcast is also available on your phone on the Apple podcasting app: https://podcasts.apple.com/us/podcast/podcasting-with-john-metaxas/id1451428833#episodeGuid=tag%3Asoundcloud%2C2010%3Atracks%2F686304568 John Metaxas is an anchor and reporter with WCBS and Bloomberg. He is the founder of WallStreetNorth Communications — wallstreetnorth.com. Its signature service is Podcasting for Lawyers.

Oct 09, 2019

Pulling Back the Legal Curtain

(published on LinkedIn July 16, 2019)

Fact, you have a great group of advisors who are there for you. One morning, you are pleasantly surprised when you are contacted by a credible third party who is interested in buying your company for a substantial sum and she presents you with a letter of intent (LOI). You read it through carefully and you contact the buyer to let her know that you are all set to go, but you just want to run it by your lawyer first. You tell her, “No big deal, I just want his quick review… I’ll have it to you by noon.” You email this message to her at 6:45 p.m., just before you leave for the night. The last thing you do before leaving your office is send the LOI to your attorney, asking him to review it so that you can sign it and send it to the buyer by noon on Tuesday (of course, it is now 7:00 p.m. on Monday night).

Your lawyer wants to please you, trust me, he does. Clearly, he has been waiting all day for your email. In fact, when he woke up on Monday morning, he had a feeling that you would get an unsolicited offer to sell your business and that he would have to review the LOI quickly. If it is not obvious, the last two sentences were written sarcastically.

Successful transactions require all parties to set reasonable expectations. If your attorney had nothing to do and was just waiting around for your email, you probably should switch attorneys. Most of us are busy — very busy — and that’s the way you want it: this means that we are in demand, working with clients on matters similar to yours. What we learn on a daily basis can then be applied to your matters for your benefit.

The lesson here — be realistic. You cannot reasonably anticipate that your attorney will be able to drop everything for you, review, analyze and potentially revise a significant document like an LOI “overnight.” If unreasonable expectations are set, everyone will be subject to unnecessary stress, impeding the ability to focus. In fact, the process will take longer under those circumstances.

Speak with your attorney, explain your needs and your wants (two different things) and discuss when you can reasonably expect the work product. It will result in a less stressful process, a better work product and get you to the finish line more quickly.

Jul 16, 2019

Selling Your Business: Carrying Paper

(published on LinkedIn July 2, 2019)

If you are working toward selling your business and you receive a proposal to sell the stock in your business, rather than the assets, I suppose you would be happy. Chances are you will be taxed at capital gains rates rather than ordinary income tax rates… all is well.

Assume, for this post, that the buyer is willing to pay your asking price. However, she wants to pay it over a long period of time and you are asked to “carry the paper” (the buyer will provide you with a promissory note to memorialize the debt).

Couple of thoughts:

  • Be cautious. If you get a pledge of your stock as security, you may think that is sufficient. Think again. If the buyer drives the business into the ground and stops paying you under the promissory note, what good is the stock?
  • Be creative. Oftentimes, there are alternatives… a lien on the underlying assets, personal guarantees, letters of credit, etc. Also, consider accepting a lower purchase price in order to accelerate the payments over a shorter period.

Bottom line, you are not wed to any deal structure. Consider several alternatives and analyze the consequences with your attorney. Remember, there is no correct answer; however, there are bad results.

Jul 02, 2019

How to Best Work on a Corporate Transaction with Your Attorney

(published on LinkedIn June 18, 2019)

Successful transactions are consummated every day, some due to the skills and experience of the deal team and others purely by luck. Assuming you prefer the former, I suggest you consider the following when working with your attorney toward a successful outcome on a transaction:

  1. Engage your attorney early on in the process. Speak with your attorney before you enter into a preliminary agreement such as a letter of intent (in connection with a purchase or sale) or a commitment letter (in connection with a financing). An experienced business attorney should be able to help you frame the structure of the transaction.
  2. Allow your attorney to review the preliminary documents and provide you with feedback before you commit to the preliminary terms. The tone of the negotiations is set at this early stage. Knowledge is power and you want to maintain a position of strength throughout the negotiation.
  3. Use your attorney as your proxy. Attorneys should be the “bad” or “tough” guy or gal during the negotiation. Chances are, you will have to maintain a good working relationship with the counterparty on a post-closing basis.
  4. Communicate with your attorney and be honest. Ask questions frequently and satisfy yourself that you understand the answers.
  5. Set realistic deadlines. Setting unreasonable deadlines will only create additional stress on all parties which leads to sub-par work product. When mapping out the timing of transaction process, ask yourself where you have leeway.
  6. Do not lawyer for your lawyer. You engaged your attorney to represent your interests. While tempting, resist self-help methods to save a few dollars. Allow your professionals to do their job.
  7. Discuss fees and bills on a timely basis. If you have questions regarding current invoices, bring those concerns up to your attorney as soon as possible. This should ensure that the time entries in question remain fresh in people’s minds.
  8. Last, bear in mind that your attorney is on your side. If you believe that your attorney is taking the wrong approach do not circumvent him or her by going directly to the counterparty. Rather, discuss your concerns with your attorney frankly and promptly.

Communication is critical when working with your attorney. Speaking often and directly should save you time and money and make for a much less stressful transaction.

Jun 18, 2019

The New Jersey Supreme Court to Determine the Scope of a Shareholder’s Right to Inspect Financial and Other Company Books and Records

By: Kenneth L. Moskowitz, Esq. and Steven R. Rowland, Esq.

On December 17, 2018, the New Jersey Supreme Court agreed to review the June 1, 2018 decision of the Appellate Division in Feuer v. Merck & Co., Inc.,[1] which narrowly interpreted the statutory right of a shareholder owning a minority interest in a public corporation to inspect the company’s books and records under N.J.S.A. 14A:5-28 (“Statute”) — which sets forth the statutory inspection rights of a corporate shareholder. The Appellate Division determined that the statutory phrase “books and records of account, minutes, and record of shareholders” did not encompass the broad universe of all corporate documents, but rather only the three types of documents that are identified in the Statute, namely, “books and records of account” — which are accounting and financial documents; “minutes,” which refers to “shareholders, board and executive committee minutes…;” and, “record of shareholders” — a list of the corporation’s shareholders. In other words, the Appellate Division narrowly construed the scope of a shareholder’s statutory inspection rights as including only the three categories of documents specifically referenced in the Statute, and it rejected the argument that those inspection rights should be interpreted to include other types of records not mentioned in the Statute.Read More

Feb 04, 2019

Land Use Basics and a Few Zoning Tips and Avoiding Attorney Ethics Violations in the Age of Digital Media

Please join the host, CB Title Group LLC, and the presenters, BMK’s Richard Schkolnick, Esq. and  Glenn Reiser, Esq., of LoFaro & Reiser LLP, for a free, valuable NJ CLE seminar.

The two 1-hour presentations will provide one NJ CLE credit and one NJ CLE Ethics credit.

Richard Schkolnick, Esq., of Brown Moskowitz & Kallen, PC, in Summit, will present “Land Use Basics and a Few Zoning Tips”, a refresher on the fundamentals of the Municipal Land Use Law with some practical tips for real estate transactional attorneys related to zoning contingency clauses.

Richard Schkolnick is the past chair of the State Bar Association’s Land Use Section and has extensive experience providing solutions to property owners in complex land use and zoning matters. He has been recognized as a “Super Lawyer” for the past eight years and specializes in applications to construct wireless communications facilities, representing national wireless carriers in over 500 telecommunications applications. He also litigates land use and related real estate cases. In addition to handling prerogative writ matters, he secured a unanimous decision from the New Jersey Supreme Court on behalf of the Township of West Orange in the State’s seminal eminent domain case, Township of West Orange v. 769 Associates, LLC, 172 N.J. 564 (2002).

Glenn Reiser, Esq., of LoFaro & Reiser LLP, will present Avoiding Attorney Ethics Violations in the Age of Digital Media. In today’s digital age most lawyers and law firms promote their legal services on a personal or business website. Like every other form of legal advertising, attorney websites must comply with the New Jersey Rules of Professional Conduct (“RPCs”). Attorneys must also be aware of legal advertising guidelines for email advertising and social media posts.

Glenn Reiser’s practice areas include: Asset recovery, attorney & professional ethics, bankruptcy & creditors’ rights, bankruptcy court litigation, business transactions, complex commercial litigation in state & federal courts, corporate & partnership disputes, debt collection & judgment enforcement, foreclosure & asset recovery, Internet law, landlord-tenant, trial & appellate practice. He has been recognized as a New Jersey Super Lawyer, Best Lawyers in America, Litigation Counsel of America. He earned his JD at Seton Hall University School of Law.

Event sponsored by


September 13th in Morristown, NJ

When & Where:

Thursday, September 13th, 2018
8:00 – 8:30 AM – Registration
8:30 – 10:30 AM: Presentation & Discussion

Morris Museum
6 Normandy Heights Rd., Morristown, NJ 07960

Go to Event Page

Sep 07, 2018

Defamation Claims Remain Disfavored Under New Jersey Law

By:  Kenneth L. Moskowitz, Esq. and Steven R. Rowland, Esq.

In Petro-Lubricant Testing Laboratories v. Adelman, 233 N.J. 236 (2018), the New Jersey Supreme Court issued a significant opinion addressing two basic issues of defamation law:  first, when does the one-year statute of limitations commence on internet defamation?   And, second, is a fair and accurate report of litigation pleadings actionable as defamation where the allegations are disputed?

By way of background, Petro-Lubricant (“Company”) sued Adelman — who ran a website called “eBossWatch.com” — the publisher of an article which described a lawsuit against the Company brought by a former Company employee.  The original article summarized and quoted the lawsuit’s allegations and was published in December 2010.  After the one-year statute of limitations period expired, the attorney informed the website operator, Adelman, that the case had been settled, and that the suit had been baseless.  The Company’s attorney demanded that the article be removed from the website.  In response, Adelman made certain changes to the underlying article — quoting even more extensively from the Complaint that had been filed in Court and making it even clearer that the article was based only on the allegations of the former employee’s filed Complaint.  The article, as modified, remained on the website notwithstanding the Company’s assertion that the lawsuit was baseless.

The trial court and Appellate Division agreed that the statute of limitations barred the claims, reasoning that both the original and the revised articles were essentially the same, and that the edited article did not revive the limitations period.  In particular, under the “single publication rule,” the “first edition” of a defamatory writing commences the one-year limitations period.  However, under that somewhat murky rule, a subsequent publication of the same defamatory statement in a later issue would constitute a separate publication subject to a separate/new limitations period.  Likewise, an article or book that was substantially modified was classified as a republication subject to a separate limitations period.  In the case of an internet publication, the Supreme Court determined that “a republication occurs to an online publication if an author makes a material and substantive change to the original defamatory article.”

Interestingly, the justices split — 4 to 3 — on whether the changes made to the article were “material and substantive” enough to trigger a new limitations period, with the majority finding a new, separate publication.  While the single publication rule will bar a claim in the absence of any change to an internet article, whether the subject changes are “material and substantive” — resulting in a new limitations period — is to be determined on a case-by-case basis.  That the Supreme Court so closely split, 4 to 3, suggests the muddled nature of the boundary between what is immaterial and non-substantive — and therefore time-barred — and a later publication that is different enough to warrant the commencement of its own new, separate limitations period.

Second, the Supreme Court also described and delineated the “fair report” privilege.  That privilege recognizes that a fair and accurate report of a pleading — a “substantially” accurate report– is not actionable defamation.  As to the later article which was not time-barred,  the Court held:  “[T]he modified article is protected by the fair report privilege because the article [represented] a full, fair, and accurate report of [the] civil complaint … which alleged, at great length, gender discrimination, workforce harassment, and retaliation.”  That is, so long as a reasonable reader would understand that the article was reporting the allegations of a civil lawsuit, its publication was privileged.  Since the article was clearly reporting on the allegations of the Company’s former employee’s Complaint, the Supreme Court affirmed the dismissal of the employer’s subsequent defamation Complaint.

In summary, the New Jersey Supreme Court continues to view defamation lawsuits unfavorably, and rules that protect publishers — the “single publication rule” and the “fair report privilege” — are employed by our courts to defeat “overreaching” defamation claims.  “[O]ur common law provides special safeguards to protect speech from unwarranted attacks through the legal process.”

©Copyright 2018, Brown Moskowitz & Kallen, P.C.  All rights reserved.  This article is for informational purposes only and is not intended to constitute, and does not constitute, legal advice.

For further information please feel free to contact either Kenneth L. Moskowitz, Esq. (klm@bmk-law.com) or Steven R. Rowland, Esq. (srowland @bmk-law.com), or call either  at 973-376-0909.

Mr. Moskowitz is a former prosecutor and is a founding partner of Brown Moskowitz & Kallen, P.C., in Summit New Jersey.  He represents clients in diverse business disputes, commercial litigation, internal investigations, “corporate divorce” matters, insurance coverage litigation and other business related disputes.   

Mr. Rowland is a litigation partner at Brown Moskowitz & Kallen, P.C.  He represents corporate clients in complex litigation matters including business disputes, commercial litigation, insurance coverage, and construction.  He also has substantial appellate experience with numerous reported decisions.


Jul 18, 2018

Stuart Brown and Sara Kimball Represent Purchaser in Company Acquisition

BMK Managing Partner Stuart M. Brown and Sara A. Kimball represented the purchaser in its recent acquisition of Precast Systems, Inc., a leading supplier of premium precast concrete for building and bridge systems based in Allentown, New Jersey.

For more information on the full range of services that BMK can provide for you, please visit our areas of practice, or feel free to contact us at (973) 376-0909.

Feb 23, 2018
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