Are the drivers who deliver Sleepy's mattresses employees or independent contractors? The outcome of a case argued Monday in New Jersey Supreme Court could have major ramifications for businesses and workers.
"This argument is about more than my three drivers," said Anthony L. Marchetti Jr., the Cherry Hill lawyer who filed a lawsuit in 2010 on behalf of Sam Hargrove, Andre Hall, and Marco Eusebio.
That's because appellate judges in federal court, where the case was originally filed, have asked New Jersey's Supreme Court to devise a test to be used to determine, in general, whether workers are employees or independent contractors under New Jersey state wage laws.
"The issue presented here is of great practical importance for small-business owners," the National Federation of Independent Business said in a friend-of-the-court brief supporting Sleepy's L.L.C.
Hargrove, of Willingboro, delivered for Sleepy's in 2008. Hall, of Pennsauken, handled Sleepy's mattresses from 2005 to 2008. Eusebio, of Bergen County, did the work from June 2003 through September 2009.
The lawsuit said drivers sign documents asserting that they are independent contractors. As such, they must buy or lease trucks and pay for maintenance, fuel, and insurance.
But they are treated like employees, the suit said, required to wear Sleepy's uniforms and adhere to its delivery schedule, which changes on short notice.
Sleepy's sets the rates, and, as a practical matter, the drivers cannot haul other customers' merchandise until they finish all the Sleepy's deliveries.
"There is no independent entrepreneurial opportunity for the drivers and no business to grow," the suit said.
In its court brief, the federation pointed out that Hargrove and Hall filed new-business registration forms with the State of New Jersey. Eusebio also set up a business.
The federation and Sleepy's argue that the court cannot ignore "business formalities," such as registering a new business, in deciding whether the men were employees.
"A test ignoring business formalities would discourage companies from contracting with smaller businesses," the federation said in its brief.
Marchetti said the New Jersey Supreme Court needs to look beyond formalities and into actual work conditions.
Sleepy's "proposed rule would create a system where a company can force a worker to create an L.L.C. [limited liability company] and work through it, and therefore be covered by none of the various protective laws" involving employees," Marchetti said.
Even though Sleepy's describes the men as independent contractors, "the drivers exercise virtually no independent control over their own work life and therefore are employees," the lawsuit said.
Improperly classified, the suit said, the drivers lose out on benefits, including workers' compensation, and are forced to pay costs that should really be paid for by Sleepy's.
Sleepy's is being represented by Elizabeth Clement, of Littler Mendelson P.C., of Philadelphia.