Good news for new / upstart businesses embroiled in litigation seeking lost profits as part of their damages. New Jersey has joined the ranks of the majority of states recognizing that there should not exist a "per se ban on claims by new businesses for lost profits damages . . .."
It has been the standard in New Jersey to bar claims for lost profits where same were remote, uncertain, or speculative. However, the Supreme Court has recently held that whenever a new or upstart business pursues a claim for damages of lost profits, such claims require a "fact-sensitive analysis of the evidence [to] decide whether plaintiffs can prove lost profits damages with reasonable certainty." In applying its new rule the Court explained: "if the trial court determines that plaintiffs' lost profits evidence is sufficient to establish their claim for damages with reasonable certainty despite plaintiffs' inexperience in developing [its new business], it should deny defendants' motions to bar the evidence and for summary judgment. If the court does not view plaintiffs' proofs to meet that test, it should grant defendants' motions and dismiss the complaints."
(Larry Schwartz v. Nicolas Menas, Esq. A-54/55-20)
The ABC Test for Independent Contractors
A common practice in the construction industry is to hire independent contractors ("ICs") in lieu of hiring employees. The benefit of having ICs over employees is that an employer would realize savings on its workers compensation contributions. This practice can be legitimate if the ICs meet this state's ABC test.
In a recent Supreme Court opinion, an employer ultimately failed the ABC test for sixteen additional employees. This saga began subsequent to an audit of its business by the government. This employer was found to have more employees (sixteen more) than it was reporting. The business appealed and an Administrative Law Judge found it only had three additional, unreported employees. Upon review of the ALJ's decision, the Commissioner of the Department determined indeed there was sixteen additional, unreported employees. The Appellate Division got involved and determined there were only five additional, unreported employees. The Commissioner appealed that decision wherein the Supreme Court agreed that there were sixteen additional employees.
The ABC test has three prongs and all three prongs must be satisfied in order for a finding that the person is an independent contractor ("IC"). The test begins with the presumption that the IC is an employee, meaning the employer has the burden proof. 'Prong A' must show that the IC is not controlled or directed by the employer nor that the employer has reserved the right to assert control or direction over the person. 'Prong B' must show that the services performed by the IC are "outside the employer's usual course of business or that the service is performed outside of all of the employer's places of business." 'Prong C' must show that the IC will survive after the services rendered are completed or stated another way the IC will not "join the ranks of the unemployed" following completion of services.
(East Bay Drywall LLC v. Dept. of Labor and Workforce Dev., A-7-21)
Peter J. Vazquez, Jr.