Over the last few years, New Jersey has enacted a number of legislative measures focused on worker misclassification and the grant of additional enforcement authority to the NJDOL. 

On July 8, 2021, New Jersey Governor Phil Murphy signed legislation (A-5890/S3920) expanding the authority of the commissioner of the New Jersey Department of Labor and Workforce Development (NJDOL) to enforce the state’s wage, benefit and tax laws. This new law allows the NJDOL to pursue a summary or expedited proceeding in the New Jersey Superior Court for an injunction against employers who misclassify workers as independent contractors. According to a press release, the legislation “will simplify the process for identifying misclassified workers” and will allow for implementation of stop-work orders at worksites where misclassification is identified.

Over the last few years, New Jersey has enacted a number of legislative measures focused on worker misclassification and the grant of additional enforcement authority to the NJDOL. On May 3, 2018, Governor Murphy signed Executive Order No. 25 establishing a task force responsible for advising the Governor’s Office on strategies “to combat employee misclassification.” In 2019, New Jersey enacted what has been coined the “Wage Theft Law,” which expanded the NJDOL’s enforcement powers when levying fines for employer violations and created additional employee protections under state wage laws. On January 20, 2020, Governor Murphy signed legislation that spelled out a procedure for addressing wage law violations that included an audit of the employer, a hearing before an administrative law judge, suspension of the employer’s licenses, a subsequent audit or inspection, and (if necessary) permanent revocation of the employer’s licenses. The purpose of that legislation was to increase the NJDOL commissioner’s authority to address wage violations that stem from employers’ misclassification of workers as independent contractors.

The new legislation, which is effective immediately, now authorizes the commissioner of the NJDOL, in the commissioner’s sole discretion, to bring an enforcement action in New Jersey Superior Court instead of holding a hearing before an administrative law judge. The legislation expressly allows for a jury trial and specific relief to aggrieved workers. If the commissioner prevails in the enforcement action, the legislation authorizes recovery of all remedies, fines and penalties available by law and an award of reasonable attorneys’ fees and litigation and investigation costs. The new legislation also provides that the commissioner may seek immediate injunctive relief in the Superior Court “whenever it appears to the commissioner that an employer has engaged in, is engaging in, or is about to engage in, any violation of State wage, benefit or tax law.”

The January 2020 legislation also permitted the commissioner to issue a stop-work order against an employer that the NJDOL determined had violated any state wage, benefit and tax laws. Under the January 2020 legislation, the commissioner could stop the work of the employer at “the specific place of business or employment in which the violation exists.” The new legislation has farther reach, as it permits the commissioner to stop the work of the employer at “one or more worksites or across all of the employer’s worksites and places of business” regardless of whether that worksite was involved in the violation.

Although the affected employer may appeal the stop-work order, the new legislation adds that once the stop-work order becomes final, any affected employee is “entitled to pay from the employer for the first ten days of work lost because of the stop-work,” and the commissioner may assess of civil penalty of $5,000 per day against an employer that violates a stop-work order.

The new legislation also:

• Establishes the Office of Strategic Enforcement and Compliance within the NJDOL to “oversee and coordinate across the divisions of the department and, when necessary, between the department and other State agencies and entities, strategic enforcement of [s]tate wage, benefit and tax laws” (A5891/S3921); and
• Makes it a violation of the New Jersey Insurance Fraud Prevention Act to make (or to coerce, solicit, encourage or conspire with any individual to make) “a false or misleading statement, representation or submission… for the purpose of evading the full payment of insurance benefits or premiums,” which includes “failing to properly classify employees in violation of state wage, benefit and tax laws” (A5892/S3922).

What This Means for New Jersey Employers

In light of the state’s continued focus on targeting employers who engage independent contractors and the increased enforcement authority of the commissioner of the NJDOL, employers should evaluate their independent contractor arrangements to ensure that they comply with current New Jersey law. Specifically, companies should review their independent contractor agreements and the application of those agreements to the day-to-day relationship between the company and the workers in order to confirm that workers are properly classified as independent contractors. Under the ABC Test, the applicable test for determining whether a worker is properly classified as an independent contractor in New Jersey, workers are presumed to be employees unless the employer can demonstrate otherwise by meeting specific criteria. Employers should review their arrangements with those classified as independent contractors to determine whether they will withstand the NJDOL’s anticipated scrutiny on this issue. As this Alert and our prior Alert make clear, the cost of noncompliance can be significant.

For More Information

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.