New Jersey Enacts Higher Penalties for Employee Misclassification | Genova Burns LLC
On July 8, 2021, Governor Phil Murphy enacted three bills that continue to raise the stakes for employers who mistakenly classify employees as independent contractors. With these changes, companies that operate in New Jersey and misclass their employees can expect to pay stiffer fines and face enforcement actions that were not previously available. Bills in the Legislative Assembly were A5890 / S3920, A5891 / S3921 and A5892 / S3922.
This law comes into force immediately and authorizes the New Jersey Department of Labor and Workforce Development (“NJDOL”) to shut down a workplace found guilty of violating the Unemployment Compensation Act (“UCL”) and impose fines for each day the employer ignores the orders. In addition, an employer who receives a stop-work order must pay their employees for the first 10 days of the stop-work order. State labor officials already have the power to shut down a job site under a bill signed by Governor Murphy in 2020. This new law increases the tools available to NJDOL to encourage respect by employers and impose penalties for non-compliance.
Specifically, New Jersey businesses will feel the impact of this new law in the following ways. Failure to pay UCL contributions may result in a work stop order and indefinite suspension of business operations. The scope of a stop work order is now broader and can apply to “all workplaces and places of business of the employer” – not just the specific workplace where the violation occurs. ‘is produced. The NJDOL can also impose a civil fine of $ 5,000 per day for each day the employer operates in violation of the stop work order. A request for a hearing contesting the stop work order does not suspend the effectiveness of the stop work order.
Failure to follow pay records can result in a permanent ban on a business’s operations in New Jersey and a fine of at least $ 1,000 per day until the employer complies. NJDOL is authorized to initiate a wage claim on behalf of any unpaid employee in accordance with state wages and hours laws (for example, the state minimum wage which is now $ 12 an hour for most industries).
This law takes effect immediately and creates the Office of Strategic Enforcement and Compliance which will investigate allegations of employee misclassification and coordinate strategic enforcement efforts both within NJDOL and other agencies. of State. To be considered to be in substantial good standing with the state, an employer must not have any outstanding debts for unpaid contributions to the Unemployment Compensation Fund. Companies with unpaid liability will not receive any commercial assistance from NJDOL and their status with NJDOL will be reported to other state agencies.
The third law comes into force on January 1, 2022, streamlines the process of identifying illegal employee classification errors and provides that companies that misclassify employees “for the purpose of evading the payment of insurance premiums »Commit insurance fraud. An adverse finding under this law will trigger an investigation by the New Jersey Department of Banking and Insurance (“NJDOBI”).
An employer who “intentionally” or “knowingly” misclassifies employees is in violation of New Jersey’s Insurance Fraud Prevention Act and can face fines starting at $ 5,000 for the first violation, $ 10,000 for the second violation and $ 15,000 for each subsequent violation.
These significant changes to New Jersey law and improved policing authority for NJDOL and NJDOBI all underscore New Jersey’s continued commitment to not only penalize employee misclassification, but also to discourage employee misclassification. use of the traditional independent entrepreneur model. Employers need to realize that the risks associated with inappropriately classifying workers as independent contractors in New Jersey may now exceed what they can afford, given the prospect of stop work orders. , the cost of paying employees for 10 days, heavy fines, agency law enforcement actions and bad publicity.