New Jersey’s Changing Laws Regarding Independent Contractors
New Jersey continues down the path of strengthening employee rights in the workplace, with recent legislation designed to help and protect workers. Last month Governor Murphy signed several bills into law to combat worker misclassification. Below is a summary of newly enacted laws which New Jersey businesses should pay close attention to:
Penalties for Misclassification
New Jersey employers that misclassify workers as independent contractors may be liable for a fine of up to $250 per employee for the first violation and up to $1,000 per employee for subsequent violations. Employers may also now be fined up to 5 percent of a misclassified worker’s gross earnings over the past 12 months.
The State’s Commissioner of Labor and Workforce Development will now be permitted to issue stop-work orders upon seven days’ advance notice to sites where employers are found to have violated state wage, benefit, and tax laws. Failure to comply with the stop-work order could subject the company to a penalty of up to $5,000 per day that it continues to conduct business in violation of this order.
Under a new law, employers and staffing agencies are jointly liable for violations of the state’s wage, hour and tax laws. Additionally, any person acting on the employer’s behalf, including owners, directors, officers or managers, may be held individually liable for violating the state’s wage and hour or employment tax laws.
Employers will also now be required to post a notice in a conspicuous location regarding employee misclassification. This notice, which must be posted by April 1, 2020, is to be issued by the New Jersey Department of Labor, and will include a prohibition on misclassification, description of what constitutes misclassification, employee rights and the process for reporting employee misclassifications. The law also protects workers from retaliation for complaining about misclassification.
Another law will allow the Department of Labor to post on its website the name of any employer or individual found to have violated state wage, tax, and benefit laws.
These changes present new challenges for employers who utilize independent contractors. It is even more important for companies to tread very carefully, and ensure that anyone who is considered an independent contractor is properly classified. New Jersey has been using the ABC test for determining worker status, however, there has also been a continued push with proposed legislation to make it even more difficult to classify someone as a non-employee.
Currently, in order to qualify as an independent contractor, the ABC test requires that:
A) An individual is free from control or direction over the performance of his or her service; and
B) The service provided by the individual is either outside the usual course of business of the employer or is performed outside the place of business where the service is performed; and
C) The individual is customarily engaged in an independently established trade, occupation, profession or business.
Given the pace at which the state is seeking to penalize companies for violating employee rights, New Jersey employers should be extra careful when classifying their workers as independent contractors and not employees.
For further information on these new changes, you may contact Wiss’ HR Advisory team.