# Carpet Remnant Warehouse, Inc. v. New Jersey Department of Labor > Supreme Court of New Jersey · August 6, 1991 · 125 N.J. 567 URL: https://www.frixlaw.com/law-library/cases/9760468 ## Case - **Full name:** Carpet Remnant Warehouse, Inc., Petitioner-Appellant, v. New Jersey Department of Labor, Respondent-Respondent - **Court:** Supreme Court of New Jersey - **Decided:** August 6, 1991 - **Citations:** 125 N.J. 567; 593 A.2d 1177; 1991 N.J. LEXIS 96 - **Precedential status:** Published - **Opinion:** Dissent by O'Hern - **Judges:** Stein, O'Hern - **Cited by:** 62 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9760468 ## How later opinions describe it (automated extraction) - holding that carpet installers were not employees of a carpet retail company where, among other things, the company posted installation jobs for the installers but they were not obligated to accept them, the installers could and did work for other carpet retailers, the install… - holding that the ABC Test becomes applicable only after a worker is found have engaged in employment not subject to a statutory exemption - applying the "ABC test" to determine whether carpet installers' services constituted employment, making them eligible for unemployment compensation ## Opinion text O’HERN, J., dissenting. Only lawyers and judges could complicate something as simple as an “ABC test.” Did you ever go into a carpet store to buy carpet and to have it installed and get the impression that the store guaranteed only the carpet, not a proper installation? And that if the carpet were installed improperly or did not reach the walls or the seams did not match, that the carpet store had no further obligations because the installer was “free from control or direction” over his or her performance and was engaged in an “independently established trade * * * or business?” No one would think that. *594 To me, the obvious corollary of the majority’s holding is that someone here has engaged in a deceptive trade practice under New Jersey’s consumer-fraud laws. Under our state consumer-fraud law a “home improvement” is defined as including the installation of “wall-to-wall carpeting or attached or inlaid floor coverings, and other changes, repairs, or improvements made in or on, attached to or forming a part of the residential or noncommercial property,” excluding the construction of a new residence. N.J.A.C. 13:45A-16.1. If the carpet installers’business is genuinely independent, it would seem to me that unless there had been some exemption granted, there would have to be a written contract that identifies the organization that “will assume some obligation in fulfilling the terms of the contract.” N.J.A.C. 13:45A-16.2(a)(4)(ii). At least the carpet company should disclose to the buyer that “a person other than the seller is to * * * assume responsibility for performance of the contract.” N.J.A.C. 13:45A-16.2(a)(13)(i). The Oregon courts seem particularly responsive to the entreaties of this industry. See Pam’s Carpet Serv., Inc. v. Employment Div., 46 Or.App. 675 , 613 P.2d 52 (remanding unemployment-division assessment to consider additional evidence on “quantity and quality of investment” by installers), review denied, 289 Or. 677 (1980), appeal after remand, 61 Or.App. 96 , 656 P.2d 340 (1982) (remanding again for failure to evaluate evidence of “economic dependence” of installers); see also Carpet Mill & Lighthouse v. Employment Div., 56 Or. App. 552 , 642 P.2d 354 (1982) (remanding appeal of carpet-business owner for reconsideration of issue of economic dependency of installers). It seems unlikely that this Court’s involvement in analysis of the business of carpet installation would evoke serious concerns for me. But this case illustrates a recurring concern that I have about the way in which courts relate to administrative agencies. On a previous occasion, I described the “judicialization of administrative law” by which courts determine the procedures that must be followed by agencies in administering *595 governmental policy. Woodland Private Study Group v. Department of Envtl. Protection, 109 N.J 62, 76-83, 533 A.2d 387 (1987) (O’Hern, J., dissenting). This case raises a deeper concern for me, namely, the extent of judicial control over choices of governmental policy made by agencies in the fulfillment of their statutory missions. We have always granted the broadest deference to the agencies of government in determining how best to implement or fulfill governmental policy. Van Dalen v. Washington Tp., 120 N.J. 234, 245 , 576 A. 2d 819 (1990). We have but a limited role to play in exercising judicial review over the actions of other governmental agencies. We have often restated those principles. Although sometimes phrased in terms of a search for arbitrary or unreasonable agency action, the judicial role is restricted to three inquiries: (1) whether the agency’s action violates the enabling act’s express or implied legislative policy; (2) whether there is substantial evidence in the record to support the findings on which the agency based its action; and (3) whether in applying the legislative policy to the facts the agency clearly erred by reaching a conclusion that could not reasonably have been made on a showing of relevant factors. Campbell v. Department of Civil Serv., 39 N.J. 556, 562 , 189 A.2d 712 (1963). I- must assume that in this case the majority considers the action of the agency to fail under either the first or the third inquiry of that traditional test, namely, that it is beyond the statutory authority of the agency to subject carpet installers to the unemployment tax or that the decision to subject these workers to the tax falls so far from the mark that it should be considered arbitrary or unreasonable. There may be some cases in which the installers might be genuinely independent. See Mississippi State Tax Comm’n v. Bates, 567 So.2d 190 (Miss.1990) (because Mississippi carpet customers either picked up carpet or had installers pick up carpet at Alabama store, and Alabama store made no payments to installers, Alabama carpet store held not to have done business in Mississippi). But the installers are not always viewed as totally independent contrac *596 tors, as when they may look to the carpet companies for health and other fringe benefits. See United Self Insured Servs. v. Faber, 561 So.2d 1358 (Fla.Dist.Ct.App.1990) (estoppel principles required that workers’ compensation coverage be extended to installers because carpet seller had withheld money from paychecks and paid premiums for coverage); Chicago Dist. Council of Carpenters Pension Fund v. Yonan, 553 F.Supp. 653 (N.D.Ill.1982) (collective-bargaining agreement required carpet company to make fringe-benefit contributions on behalf of subcontractors such as carpet installers). I have no sense here that we are compelled “blindly [to] sustain a clearly erroneous result” with a “sense of wrongness” arising from an “obvious overlooking of crucial evidence.” Trauma Nurses, Inc. v. Board of Review, 242 N.J.Super. 135, 142 , 576 A. 2d 285 (App.Div.1990) (reversing decision that nurses are employees of employment broker). There is simply no comparison between the status of these carpet installers and skilled nurses. In that case, as licensed professionals the nurses were entirely free from control or direction by the employment source: “[T]he hospital is in complete control over his or her activities, subject of course to applicable professional standards.” Id. at 140 , 576 A.2d 285 . This then is a payroll-tax case. As the majority correctly points out, ante at 580, 593 A. 2d at 1184, unemployment-compensation funds were created to avoid the catastrophic dislocations occasioned by free-market economics. The purpose of the funds is “to protect the welfare of the people by providing a cushion against the shocks and rigors of unemployment and employment disability.” Trauma Nurses, supra, 242 N.J.Super. at 141 , 576 A.2d 285 . In essence the Department of Labor has decided, under the mandate given to it, not to exempt this form of economic enterprise from the broad-based tax that sustains that fund. When it comes to governmental taxation decisions, we have always exhibited the highest degree of deference to the taxing authority. In the field of taxation, states are given “large leeway in making classifications and *597 drawing lines which in their judgment produce reasonable systems of taxation.” Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 359 , 93 S.Ct. 1001, 1003-04 , 35 L.Ed.2d 351, 355 (1973). The majority’s reasoning for invalidating the levy of this tax on the carpet installers is flawed. The Court’s theory is that because no benefits may flow to the party who is subject to the levy, the levy itself is invalid. If that were so, those of us who hold tenured positions of office should be exempted from the tax because there is no chance that we will realistically ever achieve its benefits. The perfectly congruent symmetry sought by the majority assumes a perfection of analysis that is required neither by constitutional principle nor by the structure of the statute. That some members of the burdened class do not benefit from the system does not render the classification arbitrary. “If the classification has some reasonable basis, it does not offend the Constitution simply because the classification is not made with mathematical nicety or because in practice it results in some inequality. The problems of government are practical ones and may justify, if they do not require, rough accommodations * * *.” Dandridge v. Williams, 397 U.S. 471, 485 , 90 S.Ct. 1153, 1161 , 25 L.Ed.2d 491, 501-02 (1970) (citations omitted). In essence, the Court, by insisting on that symmetry, is making a policy determination that persons who are not likely to be in need of unemployment benefits should not be compelled to pay into the fund, nor should their employers. In exercising that policy function the Court fulfills the prophesy of Justice Neely of the West Virginia Supreme Court that “[t]he judiciary can be trusted to oversee bureaucrats because it does not share the same institutional bias.” Collard, Book Review, 57 Notre Dame L.Rev. 616 (1982) (reviewing R. Neely, How Courts Govern America (1981)). The debate about the degree of deference that courts should accord to administrative agencies has been a forty-year struggle and the end is nowhere in sight. Justice Frankfurter *598 pointed out long ago that “[sjince the precise way in which courts interfere with agency findings cannot be imprisoned within any form of words, new formulas attempting to rephrase the old are not likely to be more helpful than the old.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 489 , 71 S.Ct. 456, 465 , 95 L.Ed. 456, 468 (1951). In New Jersey, we have tended to restate the familiar three-part test: whether there was sufficient evidence in the record, whether the agency decision was within its statutory authority, and whether there was a clear abuse of discretion. Supra at 572-573, 593 A. 2d at 1180. Recently, however, there has been a good deal of rethinking about administrative law. In a book entitled Administrative Law: Rethinking Judicial Control of Bureaucracy, Professor Edley suggests new formulas. “Where else might we look?" he asks. He concludes: “The generative element of legitimacy is that courts must be perceived to be contributing to sound government. This is a concrete source of public acceptance. The other two branches rely on it for legitimacy. So it should suffice for the judiciary as well.” The real question though is whether courts are better perceived as contributing to sound government when we defer to administrative agencies or when we revise their decisions. We hear much of an overburdened judiciary and yet we continue to make what one must recognize as essentially bureaucratic decisions: whether a school employee should be retained in employment, Hall v. Board of Educ., 125 N.J. 299 , 593 A. 2d 304 (1991); whether an employee should be denied unemployment-compensation benefits based on the circumstances of her case, Selfv. Board of Review, 91 N.J. 453 , 453 A.2d 170 (1982); and finally, as here, whether this carpet company should contribute to maintain the State’s unemployment-compensation fund. To me, that is a simple question of governmental policy. It should wisely be left to the judgment of the agency entrusted by the Legislature with the administration of the program. It is just possible that society could resolve the problem of the carpet installers without our judicial involvement. After all, as *599 the majority points out, a vast array of similarly situated businesses and industries have gained the attention of the Legislature, and their situations have been resolved. Ante at 580, 593 A. 2d at 1184 . I think that we reinforce that democratic process when we let it be understood that these are primarily matters of governmental policy best resolved by those who have access to the economic information. For Reversal and Remandment — Chief Justice WILENTZ, Justices CLIFFORD, HANDLER, POLLACK, GARIBALDI and STEIN — 6. Dissenting — Justice O’Hern — 1. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9760468. Public record. Not legal advice.