On March 26, 2026, in Sanger v. Next Level Business Services, Inc., et al., the New Jersey Appellate Division affirmed the dismissal of a sexual harassment and discrimination lawsuit finding that the plaintiff was an independent contractor and, therefore, could not invoke the broad protections of the New Jersey Law Against Discrimination (NJLAD). The unpublished decision provides guidance for employers on proper worker classification and highlights several critical facts considered under the 12-factor Pukowsky test.
Background
In 2018, plaintiff—an experienced technology recruiter—formed her own company, Mirosoft, to provide recruiting services to technology companies. In 2019, Cognizant Technology Solutions (Cognizant) contacted plaintiff to inquire whether she would be interested in working for the company. Plaintiff’s point-of-contact were two executives at Next Level Business Services (NLB), which provided recruitment services to Cognizant. Following an interview, plaintiff executed agreements for Mirosoft to provide recruiting services to NLB and Cognizant.
Among other things, the agreements collectively stated that:
- Plaintiff was an independent contractor and would not be considered an employee
- Plaintiff had sole responsibility over “employer-related functions,” including “supervising, disciplining, discharging, reviewing, evaluating, and setting the pay rates”
- Plaintiff would be paid through her company, Mirosoft
- Plaintiff was responsible for tax withholdings, Social Security payments, and other employee protection benefits
- Plaintiff was ineligible for employee benefit plans
- Plaintiff’s project duration would last 12 months
Plaintiff began working remotely and eventually twice a week in “any available cubicle or conference room” in Cognizant’s office. Two months later, plaintiff’s husband formed his own recruiting company, Staffing Idea, for which plaintiff contracted with Cognizant. The arrangement resulted in NLB paying “heavy referral fees.” Several months later, Cognizant terminated her contract.
Plaintiff sued defendants for sexual harassment and race and gender discrimination under the NJLAD. Among other things, plaintiff claimed that she was subjected to inappropriate conduct by defendants’ executives, including one’s legs rubbing against hers during a meeting and being propositioned to engage in sexual relations. While plaintiff alleged her refusal resulted in her termination, defendants asserted she was terminated for “engaging in what could be perceived as fraudulent conduct” by her failure to disclose her husband’s ownership interest in Staffing Idea.
During her deposition, plaintiff admitted she understood that she would be brought on as an independent contractor and that she used her husband’s recruiting company to perform services for Cognizant without disclosing their marital relationship.
Procedural History
To determine worker status for NJLAD claims, the motion court applied the 12-factor “totality of the circumstances” test set forth in Pukowsky v. Caruso, which considers, among other things, the “employer’s right to control the means and manner of the worker’s performance”; “the length of time” the individual worked; “the method of payment”; “whether the work was an integral part” of the employer’s business; whether the worker accrued retirement benefits; whether the employer paid social security taxes; and the parties’ intent.
Based on its analysis, the motion court granted summary judgment to defendants finding that plaintiff was an independent contractor and, therefore, not entitled to protection under the NJLAD. Nevertheless, the court addressed the discrimination allegations and concluded that the conduct at issue was not sufficiently severe or pervasive to establish her claims, and that defendants lawfully terminated plaintiff for her undisclosed involvement in her husband’s recruiting company. Plaintiff appealed.
Appellate Division’s Decision and Analysis
The Appellate Division affirmed the motion court’s ruling and highlighted several critical facts that “overwhelmingly support[ed] plaintiff’s status as an independent contractor”:
- Plaintiff controlled the “means and manner” of her daily work and was solely responsible “for any employer-related functions”
- Plaintiff set her own schedule and chose when to work in the office
- Plaintiff did not have a designated office or workspace
- Plaintiff could not participate in benefit plans
- Plaintiff’s contract had a limited 12-month duration
- Plaintiff was paid through Mirosoft, rather than individually, and was responsible for withholding taxes, Social Security payments, and administering disability benefits
- Plaintiff was one of several recruiters for defendants indicating her work was “incidental” and not “integral or essential”
- Plaintiff had an established business providing the same services before working with defendants
- Plaintiff admitted she understood she was brought on as an independent contractor
The court also agreed with the motion court’s determination that the alleged inappropriate conduct did not rise to the level of severe and pervasive necessary to establish her discrimination claims, and that Cognizant had a legitimate, nondiscriminatory reason for terminating plaintiff.
Employer Takeaways
The decision highlights the importance of properly structuring, documenting, and managing independent contractor relationships. To mitigate liability under the NJLAD, employers should take the following steps:
- Where feasible, retain and compensate independent contractors through their own established business entities.
- Limit oversight to the final deliverables, rather than directing the means or manner of performance.
- Exclude independent contractors from employee benefit plans, performance evaluations, and disciplinary processes.
- Ensure that independent contractor agreements clearly provide that the contractor is responsible for all taxes, insurance, and benefits, and expressly disclaim any employer-employee relationship.
If you have any questions related to the Appellate Division’s decision, or need assistance reviewing your independent contractor policies or agreements, please reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100 or 619.292.0515.