New Jersey Strengthens Misclassification of Workers Penalties
Governor Murphy has passed a slate of new employment laws focused on protecting employees. This article details the laws related to misclassification of employees and the heightened negative consequences that result from the practice of misclassification.
New Jersey has recently enacted a law strengthening penalties on employers who misclassify employees as independent contractors. In addition to current penalties under state law, the employer will be subject to:
- A “misclassification penalty” of up to $250 for a first violation and $1000 for subsequent violations; and
- A penalty of up to 5% of misclassified worker’s gross earnings over the past 12 months that the worker was misclassified.
The law also provides dispute mechanisms for employers who believe they have been unfairly charged under this section.
New Jersey has also passed A-5838, which grants the Commissioner of Labor and Workforce Development extended power to ensure compliance with this and other State employment laws. The law allows the Commissioner to inspect the worksite (including all of the employment records) of any employer suspected of being noncompliant with state compliance laws, including the classification laws. Failure to correct misclassification can result in the Commissioner issuing a stop-work order against the offending business. This order will persist until the misclassification is corrected and all fines have been paid.
Employers must now also post notices regarding misclassification of employees (A-5843). The state will create language that employers can use to comply with this law. The poster must be displayed by April 1. Such a poster will be placed conspicuously in an area frequented by employees and contain the following information:
- Employers may not misclassify employees;
- The official legal definition that the Department of Labor and Workforce Development uses when determining whether an employee is an independent contractor;
- The benefits and protections afforded to the employee under the misclassification law;
- Any remedies available under state law for a misclassified employee; and
- Contact information for a government entity capable of receiving a complaint or information regarding a complaint under this law.
New Jersey has also added joint employer liability for misclassification of workers (A-5840). Those entities who act on behalf of an employer or provide workers to the employer through a labor contract will be held jointly and severally liable for any misclassification done by the primary employer AS IF they were the primary employer.
The governor has also approved the use of community compliance to assist in the enforcement of misclassification law. S-4226 allows the Department of Labor and Workforce Development to list on its website the names of any employer not in compliance with its misclassification laws (when a final order has been issued). The Department will remove the name of the offending employer when the employer comes into compliance. This list is not only used for public pressure to comply, but appearance on this list prevents an employer from contracting with any public body.
With the exception of the poster requirement, all of these new directives have already taken effect. Employers should double and triple check that all of those labelled as independent contractors have evidence on file to back up that designation. With due diligence, an employer can head off hefty fines and a potential stop work order.