New Jersey Cracks Down Further on Employee Misclassification

In early 2020, Governor Murphy signed a series of bills aimed at identifying and penalizing businesses for misclassification of employees as independent contractors.  On July 8, 2021, New Jersey enacted four additional laws to further its previous efforts to combat misclassification of workers.

A5890: Injunctions and Stop-Work Orders  

This law, effective immediately, allows the Commissioner of the Department of Labor and Workforce Development (“DOL”) to seek a superior court injunction to prevent ongoing violations of State wage, benefit, and tax laws stemming from employee misclassification.  Previously alleged violations were handled administratively before the Office of Administrative Law (“OAL”).  Under this new law, the Commissioner can bypass the OAL and go straight to court.  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.

Additionally, if the Commissioner concludes that an employer is in violation of wage and hour laws, the Commissioner is now able to issue broader stop-work orders that extend across “all of the employer’s worksites and places of business,” thereby effectively shutting down an employer’s business in its entirety.  Prior to the passage of this bill, the Commissioner’s shut-down orders could only extend to the specific location where the violation occurred.  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 for the first ten days of work lost due to the order.  Additionally, the DOL can impose up to $5,000 in civil penalties for each day the employer continues to operate business in violation of the stop-work order.

Notably, stop-work orders are not stayed by an employer’s request for a hearing.  Moreover, in the event the employer does not request an appeal in writing within 72-hours of the Commissioner’s decision, the stop-work order will become final.

A5891: Office of Strategic Enforcement and Compliance

This law, effective immediately, creates the “Office of Strategic Enforcement and Compliance,” to coordinate the investigation of employee misclassification claims across all divisions of the DOL and other state agencies.  To be considered in substantial good standing with the State, an employer must have no outstanding liabilities to the DOL, including unpaid contributions into the Unemployment Compensation Fund.  Those businesses with outstanding liability will not receive any direct business assistance from the State and will be reported to other State agencies.

A5892: Insurance Fraud

This law, effective January 2022, makes misclassifying employees for the purpose of evading payment of insurance premiums a violation of the New Jersey Insurance Fraud Prevention Act.   An adverse finding under this law will trigger an investigation by the New Jersey Department of Banking and Insurance.  Penalties for fraud include $5,000 for the first violation, $10,000 for the second violation, and $15,000 for each subsequent violation.

A1171: Public Database for Public Work Projects

This law creates a public database of certified payroll information for all public works projects.  It is effective January 2022.

In conclusion, these four laws highlight the State’s renewed focus to crack down on worker misclassification.  In light of these developments and 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.

Published on:

Comments are closed.

Contact Information