New Jersey Continues its Push to Combat the Misclassification of Workers as Independent Contractors
Utilizing independent contractors in New Jersey can be very risky given New Jersey’s broad definition of employee and the significant penalties imposed for the misclassification of employees as independent contractors. Recently, New Jersey continued its push against worker misclassification with the enactment of a package of bills that expand the power of the New Jersey Department of Labor (NJDOL) to enforce state wage, benefit, and tax laws. The new bills also enhance the penalties for employers that misclassify workers as independent contractors.
The new bills follow a package of laws that were enacted in January 2020, which dealt with employee misclassification laws. As we previously posted, among other things, the 2020 laws authorized the Commissioner of the NJDOL to issue stop work orders for any location where the Commissioner had determined that an employer was in violation of any of New Jersey’s wage, benefit, or tax laws. Under the new bills, a stop work order can now be issued for all of the employer’s locations, not just the location where the violation occurred. If any employer conducts business in violation of a stop work order, the employer faces penalties of $5,000 per day.
The new bills also empower the Commissioner to seek an injunction in the Superior Court of New Jersey to prevent ongoing violations of New Jersey’s wage, benefit, or tax laws. If successful in a Superior Court action, the Commissioner is entitled to collect attorneys’ fees and costs from the employer. Previously, such enforcement actions were handled administratively before the Office of Administrative Law.
The new bills also create an “Office of Strategic Enforcement and Compliance” within the NJDOL to coordinate enforcement of New Jersey’s wage, benefit, and tax laws. Given the creation of a new office within the NJDOL, and Governor Murphy’s consistent push to punish employers that violate the law, New Jersey employers should expect increased enforcement actions from the NJDOL.
Finally, the new bills amend the New Jersey Fraud Prevention Act to make it a violation of the Act for an employer to misclassify an employee as an independent contractor for the purpose of evading the payment of insurance premiums. Insurance fraud involving employee misclassification is subject to a penalty of $5,000 for the first violation, $10,000 for the second violation, and $15,000 for each subsequent violation, plus restitution to any insurance company or person who has suffered a loss as a result of the insurance fraud.
Given the significant powers granted to the NJDOL to combat employee misclassification, New Jersey’s broad definition of “employee,” and the significant liabilities arising from employee misclassification, businesses should be extremely cautious in utilizing independent contractors in New Jersey and should do so only after consulting with experienced counsel.
If you have any questions about the classification of your business’s workers, please contact us at (201) 345-5412 or through our online scheduling calendar to set up a complimentary consultation.