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New Jersey Supreme Court Extends Protection of State Whistleblower Act to Independent Contractors

Winter 2008Cole Schotz DocketAttorney: Jamie P. Clare

In an expansive new ruling, the state’s highest court has held that a New Jersey chiropractor hired by Prudential Insurance Company as an “independent contractor” is an “employee” under New Jersey’s whistleblower statute.  The case is significant to New Jersey employers because it broadens the class of workers entitled to assert claims under New Jersey’s Conscientious Employee Protection Act (“CEPA”), a statute already recognized as the most far-reaching whistleblower statute in the nation.

CEPA prohibits an employer from taking adverse employment action against any employee who exposes an employer’s criminal, fraudulent or corrupt activities.  CEPA authorizes an aggrieved employee to bring a civil suit against an employer, and individual managers, who retaliate in violation of the statute.  Workers are protected from retaliation and employers are deterred from activities that are illegal or fraudulent, or otherwise contrary to a clear mandate of public policy concerning the safety, health and welfare of the public.

In D’Annunzio v Prudential Ins. Co. of Am., the New Jersey Supreme Court ruled that the term “employee” should be read broadly in order to reflect the changing workplace and to protect the public policy interests advanced by CEPA.  The Court ruled that the definition of an “employee” under CEPA “should include adjustment for the modern reality of a business world in which professionals and other workers perform regular or recurrent tasks that further the business interests of the employer’s enterprise” and that the mere fact that they are compensated through contracts instead of wages and benefits should not prevent them from being protected as whistleblowers.

D’Annunzio was a licensed chiropractor who signed a consultant agreement with Prudential to work 20 hours per week as a chiropractic medical director reviewing treatment plans.  His consultant agreement stated it was not intended to create an employer-employee relationship.  Prudential designated him as an independent contractor, required him to maintain an active private professional practice and to agree that his billing to Prudential would not exceed fifty percent of his total practice.  Yet, according to D’Annunzio, from his first day, Prudential sought to exert extensive control over him, and provided a list of duties, workflow instructions and timesheet, strong evidence, he claimed, of an employer-employee relationship.

Prudential fired D’Annunzio after he repeatedly clashed with supervisors about how he was performing his duties.  He sued the company and seven managers under CEPA, alleging that they fired him in retaliation for his complaints about the company’s alleged unethical and illegal practices, including insurance violations, failure to pay MRI bills and improper use of nurse case managers in the approval of medical care.

The Supreme Court ruled D’Annunzio was entitled to proceed with his whistleblower claim, notwithstanding that his agreement described him as an independent contractor, because Prudential made him an integral and necessary part of its day-to-day operations and controlled his activities in minute detail.

The case is a cautionary tale for those New Jersey employers that increasingly rely on independent contractors in their workforce, and demonstrates the continued willingness of New Jersey courts to extend the broad protections of its employment laws, including CEPA, to such “employees.”

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