Lindabury, McCormick, Estabrook & Cooper, P.C. Firm News & Events
Since early 2020, New Jersey has passed a series of legislation aimed at identifying and penalizing businesses for misclassification of employees as independent contractors. On July 8, 2021, New Jersey enacted A5890, which empowers the Commissioner of the Department of Labor and Workforce Development (“DOL”) to issue broad stop-work orders to employers in violation of wage and hour laws that extend across “all of the employer’s worksites and places of business.” As set forth more fully below, we are beginning to see the DOL invoking this extraordinary power to effectively shut down an employer’s business in its entirety.
A5890 Stop-Work Orders and Injunctions
Prior to the passage of this bill, the Commissioner’s shut-down orders could only extend to the specific location where the wage and hour violation occurred. Under A5890, however, the Commissioner may now issue stop-work orders that extend across “all of the employer’s worksites and places of business.” Moreover, these stop-work orders can remain in effect until the Commissioner determines that the employer is compliant and has paid any penalties due. Employers must pay workers affected by a stop-work order for the first ten days of work lost due to the order, and the DOL can impose up to $5,000 in civil penalties for each day the employer continues to operate the business in violation of the stop-work order.
A5890 further enhances the punitive measures non-compliant employers face, as the stop-work orders cannot be stayed by a request for a hearing to challenge the Commissioner’s action. Moreover, if the employer does not request an appeal of the stop-order in writing within 72-hours of the Commissioner’s decision, the stop-work order will become final.
Prior to the passage of A5890 alleged misclassification violations were handled administratively before the Office of Administrative Law (“OAL”). Under this new law, the Commissioner can now bypass the OAL and go straight to the superior court to seek injunctive relief to prevent ongoing violations of State wage, benefit, and tax laws stemming from employee misclassification. If the Commissioner prevails, all remedies are available to the victims of misclassification. Additionally, the Court shall award reasonable attorney’s fees and litigation and investigation costs. Determining whether to pursue an enforcement action is left to the “sole discretion” of the Commissioner.
Recent Stop Work Orders Issued
In January 2022, the DOL issued stop-work orders to five out-of-state contractors who misclassified workers performing construction work in New Jersey. Following an investigation, each subcontractor was cited for misclassifying workers, and found to owe a total of $29,658 in back wages. Additionally, each subcontractor was also assessed a misclassification penalty equaling five percent of the workers’ gross earnings for the prior 12 months, totaling $5,954, to be paid to the affected workers.
Most recently, on March 16, 2022, the DOL issued stop-work orders to three contractors performing construction work in Jersey City following an unannounced investigation at the work site in response to allegations of worker misclassifications. The investigation, which found that the three subcontractors owe a total of $19,800.00 in back wages, continues to be ongoing.
Takeaway
These examples clearly reflect the State’s willingness to act on its legislation and crack down on worker misclassification. While the construction industry appears to be a recent focus, employers across all industries must be mindful of the severe penalties associated with misclassification violations. We strongly recommend that employers consult with legal counsel and undergo an analysis of their existing pay, timekeeping, and classification practices and policies to ensure compliance.