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Author: Scarinci Hollenbeck, LLC
Date: February 10, 2020
The Firm
201-896-4100 info@sh-law.comNew Jersey Gov. Phil Murphy recently signed several bills into law that will strengthen the state’s efforts to combat worker misclassification. Among the new enforcement tools, the laws authorize the New Jersey Commissioner of Labor and Workforce Development (Commissioner) to impose financial penalties and issue stop-work orders to employers who misclassify workers.
Worker misclassification occurs when a bona fide, common law employee is classified to be an “independent contractor.” In some cases, employers intentionally misclassify workers to avoid tax withholding, overtime pay, and insurance requirements, such as Workers Compensation and Unemployment Insurance. However, misclassification can also occur simply because the employer fails to properly understand and apply the law. Under New Jersey law, a worker is an employee unless the employer can demonstrate all three prongs of the ABC test:
As discussed in prior articles, the Murphy Administration has prioritized efforts to crack down on employers misclassifying workers as independent contractors. In 2018, Gov. Murphy signed an executive order establishing a task force on worker misclassification. Last year, the Task Force issued its first report, which concluded that 12,315 workers were misclassified, more than $462 million in wages were underreported, and more than $13 million in contributions (unemployment, disability, family leave insurance, and workforce) were underreported. The Task Force also issued a series of recommendations, which included legislative action.
In January, Gov. Murphy signed six bills into law aimed at curbing worker misclassification. Below is a brief summary of the new laws:
Given the increased scrutiny and enhanced penalties for violations, New Jersey businesses that use independent contractors should verify that these workers are not actually employees. Mistakes, no matter how inadvertent, could lead to costly employments lawsuits and legal penalties.
If you have any questions or if you would like to discuss the matter further, please contact me, Sarah Tornetta, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.
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