By Jeffrey A. Gruen

The Appellate Division recently upheld the dismissal of an employee's claim under the New Jersey Wage Payment Law (NJWPL), even though his employer didn't notify him before it switching his classification from salaried to hourly. The employee's claim failed because his pay rate didn't change and he received payment for all hours worked.

Facts

Steven D'Agostino began working as an independent contractor, paid on an hourly basis, for Musical Heritage Society (MHS) in October 2006. MHS sells music through the mail and on the Internet. D'Agostino primarily worked on programming MHS's jazz website, which was scheduled to launch in September 2007.

Three months after commencing work for MHS, D'Agostino became a full-time employee, at which point the company expected him to work a minimum of 40 hours per week. However, MHS agreed to accommodate his preexisting commitments as a classical guitar teacher by permitting him to leave early 3 days each week and make up the time by working later on the other days.

In spring 2007, D'Agostino began arriving at work significantly later than his 9:00 a.m. start time. When confronted, he said that his tardiness was due to his sleep apnea. His tardiness continued to worsen, and he didn't regularly make up the time he missed. That summer, MHS reclassified him as an hourly employee without prior notice because he wasn't working the requisite 40 hours per week.

In September 2007, D'Agostino asked why he hadn't been paid for the Labor Day holiday and was told that the company had switched him to hourly status because he had been averaging 27 hours per week instead of 40. He filed a complaint with the New Jersey Department of Labor (NJDOL), but his complaint was dismissed as unsubstantiated.

In October 2007, MHS terminated D'Agostino's employment because his haphazard schedule had a negative impact on its operations. D'Agostino filed a lawsuit against MHS in the Superior Court of New Jersey alleging, among other things, that his former employer violated the NJWPL by underpaying him and failing to provide notice that it had reclassified him from salaried to hourly status. He also claimed that MHS terminated him in retaliation for his complaint with the NJDOL. The trial court dismissed his claims, and D'Agostino appealed.

Appellate Division's decision

The Appellate Division noted that the NJWPL requires employers to notify employees of any changes in pay rates or paydays before implementing the changes. However, the Appellate Division concluded that MHS didn't change D'Agostino's rate of pay.

Rather, the company determined his hourly rate by dividing his weekly salary by 40 hours. As a result, it paid him the same rate he had been earning for the hours he actually worked. Because MHS didn't change his rate of pay and paid him for all the hours he worked, it didn't violate the NJWPL.

As for the retaliation claim, the Appellate Division concluded that MHS provided a legitimate reason for D'Agostino's termination—persistent tardiness. The Appellate Division further opined that he hadn't provided sufficient evidence to demonstrate that his complaint to the NJDOL, which was found to be unsubstantiated, was a motivating or determinative cause of his termination.

Bottom line

Although this decision is encouraging for employers, worker misclassification is a hot issue these days. Employers should take great care with proper employee classification and payment of wages. You are encouraged to consult with outside counsel about those decisions, especially if you're considering reclassifying employees from salaried to hourly status.

Jeffrey Gruen is an Associate  of Day Pitney LLP, and a contributor of the New Jersey Employment Law Letter.