W Facts of the Case e write to inform you of a recent court - PDF document

G Employment Alert April 2006 Independent Contractors Now Protected by New Jersey’s Whistleblower Law By: David M. Wissert, Esq. and Amy Komoroski Wiwi, Esq. W Facts of the Case e write to inform you of a recent court decision that expands the class of In D’Annunzio v. Prudential Insurance individuals entitled to the protections Company of America , No. A-2544-04T1 (App. and remedies of New Jersey’s “whistleblower” law, Div. February 23, 2006), the plaintiff, a licensed the Conscientious Employee Protection Act chiropractor, contracted (through his professional (“CEPA”), N.J.S.A. 34:19-1 et seq . CEPA protects association) with Prudential Property and an employee from retaliatory action when she Casualty Insurance (“Prudential”) to serve as a objects to a practice she reasonably believes to be chiropractic medical director in the Personal in conflict with a clear mandate of law or public Injury Protection department. The contract policy concerning the public health, safety, or between the parties stated that it was not to be welfare, or protection of the environment. construed as creating an agency, partnership, joint Recently, the New Jersey Appellate Division ruled venture or employer-employee relationship, and that CEPA’s definition of employee, which turns required the plaintiff to pay all applicable taxes. on the employer’s “control and direction” of the Among the plaintiff’s primary duties was to worker, does not foreclose the possibility that a review requests for pre-approval of chiropractic worker who might be classified as an “independent treatment plans to determine whether proposed contractor” for other purposes, may qualify as an treatments were “medically necessary” for “employee” under New Jersey’s whistleblower purposes of compliance with the Automobile statute. Thus, an independent contractor could sue Insurance Cost Reduction Act (“AICRA”). a company for which she has performed services Pursuant to AICRA, only a licensed medical for wrongful termination of the independent doctor can deny coverage on the basis that the contractor relationship under CEPA, even though treatment requested was not medically necessary. the statute purports to provide a cause of action While many insurance companies contract with only to “employees.” outside vendors for this type of work, Prudential retained “in-house” independent contractors for this service. This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. L Roseland, New Jersey Telephone 973.597.2500 65 Livingston Avenue www.lowenstein.com 07068-1791 Fax 973.597.2400

G Prudential terminated the plaintiff’s contract Discrimination. Under the Pukowsky test, twelve after six months on the grounds that the plaintiff factors are weighed to determine a worker’s status acted unprofessionally and failed to follow as employee or independent contractor. instructions. Specifically, Prudential alleged that Upon motion for summary judgment by the plaintiff: (1) refused to limit his review and Prudential, the trial court dismissed the plaintiff’s recommendations to chiropractic issues (for which CEPA claim on the grounds that the plaintiff was he was licensed, qualified, and hired to advise); (2) not an “employee” entitled to CEPA’s protections, failed to conform his written recommendations to but was instead, an independent contractor, to the format prescribed by company policy; (3) whom the protections and benefits of CEPA repeatedly and improperly accused physicians of do not extend. The plaintiff appealed the trial fraud; (4) continually offended the staff with court’s decision. whom he worked; and (5) refused to grant The Appellate Court’s Decision approval for appropriate medical procedures. The Appellate court rejected the approach After receiving several oral warnings, the used by the trial court, finding many of the factors plaintiff attended an “official counseling session” articulated in Pukowsky to be irrelevant to whether with a Prudential employee who was responsible a worker should be classified as an “employee” for overseeing his work, following which, he under CEPA. The Appellate court found that refused to appropriately conform his behavior and CEPA’s definition of “employee,” which includes work product. Accordingly, Prudential terminated “any individual who performs services for and the contract; the plaintiff was escorted to his under the control and direction of an employer,” cubicle where he gathered his belongings and then does not incorporate all of the factors used to was escorted out of the building. define the term “employee” in other contexts. The The Trial Court Decision Appellate court held that the following four The plaintiff brought an action against factors are determinative of whether the plaintiff is Prudential alleging, among other claims, that he an independent contractor or an “employee” for was wrongfully discharged in violation of CEPA in purposes of a whistleblower claim: retaliation for his complaints that Prudential took (1) the employer’s right to control the means part in unethical and illegal practices. In and manner of the worker’s performance; determining whether the plaintiff was Prudential’s “employee” and, therefore, entitled to maintain a (2) whether the worker was supervised; claim under CEPA, the trial court applied the test (3) the furnishing of equipment and a first adopted by New Jersey courts in Pukowsky v. workplace; and Caruso , 312 N.J. Super. 171 (App. Div. 1998), a (4) manner of termination. case brought under the New Jersey Law Against

G What Does This Mean for Employers? In concluding that evidence supplied to the trial judge precluded dismissal of the plaintiff’s Given the growing marketplace trend toward CEPA claim, the Appellate court highlighted the classifying workers as “independent contractors”, it following facts as pertinent to whether Prudential is important for employers to recognize that certain exercised “direction and control” over the plaintiff independent contractors with whom they work for purposes of CEPA: may be entitled to the same protections and benefits as employees under CEPA if the company • Upon commencing work, the plaintiff was exercises significant control over the worker given a “sign-in” sheet by which he was to in question. Companies should review the account for his time. classification of all of their workers--employees and independent contractors--to ensure that • The plaintiff was given various computer workers are classified appropriately and that training, assigned to his own cubicle, and the legal requirements flowing from such provided with all necessary supplies, classifications are being followed. including a computer, a private telephone line, filing cabinets, an e-mail address, a If you have any further questions about the issue mailbox, and supplies. discussed in this Alert, or whether any of your policies should be examined as a result of this decision, or any • Prudential required the plaintiff to report to other employment practices or compliance issues, work at certain designated times and please do not hesitate to call David M. Wissert, Chair prohibited the plaintiff from performing his of the Employment Litigation Group, or Amy duties at his home or elsewhere. Komoroski Wiwi, a member of the Employment Law • Prudential directed and required the plaintiff Practice Group, at (973) 597-2500. to adhere to certain company protocols and “chain of command” directives in the discharge of his duties. • The plaintiff was instructed as to Prudential’s “expected approval rate” for treatment requests, and the required format and scope of the plaintiff’s recommendations. • The contract allowed Prudential to terminate the plaintiff for any or no reason on 60 days’ notice, and when Prudential terminated the plaintiff’s contract, he was escorted from the building in the same manner in which Prudential would sever its relationship with an employee.