This week, New Jersey Governor Phil Murphy signed a batch of laws regarding misclassified workers to crack down on companies that are too liberal with the term independent contractor.
New Jersey’s New Employee Misclassification Laws
The bills signed include A5843, which requires employers to post a notice about employee misclassification, including the standard that’s applied to determine whether a person is an employee or an independent contractor.
That posting must outline the benefit and protections an employee is entitled to, and it must include contact information to make a report or file a complaint about misclassification.
A5843 also makes it illegal to discharge or discriminate against someone who made an inquiry or filed a complaint.
Anyone who violates this section of the law will be guilty of a disorderly persons offense and will be fined.
And the company will be required to reinstate the individual’s job as well as pay for legal costs, lost wages and benefits and punitive damages equal to two times the lost wages and benefits.
A5839 lets New Jersey’s Commissioner of Labor and Workforce Development slap a company with a misclassification penalty of up to $250 per misclassified worker for a first violation and up to $1,000 per misclassified employee for additional offenses.
This law also gives the Commissioner power to order a company to pay a penalty to misclassified workers in an amount of up to 5% of their gross earnings over the past 12-month period.
If an investigation or complaint implicates a business for violating a New Jersey wage, benefit or tax law, A5838 allows personnel from the Commissioner of Labor and Workforce Development to enter that business and examine payroll and records, interview employees, call hearings and take testimony and depositions.
Anyone who tries to hinder or delay the efforts allowed under NJ A5838 or anyone that doesn’t produce the requested documents faces a fine of at least $1,000 and will be guilty of disorderly persons offense.
Each day an employer fails to comply will be an additional offense.
New Jersey’s A5838 also lets the commissioner issue stop-work orders that require violators to cease all operations until they come into compliance and pays any related penalties.
And those companies can be charged $5,000 a day for violating the stop-work order.
Governor Murphy signed S4228, allowing the Department of Treasury and the Labor and Workforce Development to share tax information.
A5840 holds labor contractors and employers equally liable for evading tax laws.
And S4226 gives the Department of Labor and Workforce Development the right to post the name of violators on its website and it outlines the conditions for doing so.
Why Misclassified Workers in NJ Matter
New Jersey lawmakers argue that the state is losing millions of dollars per year from companies that act like their work is being done by freelancers when actually it’s done by people who should be labeled and treated as employees.
The situation deprives hard-working people of the benefits they deserve, including social security, workers’ compensation and overtime, lawmakers say.
And misclassifying employees also creates an unfair playing field, giving an advantage to businesses that save money by making false claims while their competitors cough up funds for payroll taxes and employee benefits, the laws’ supporters add.
“These bills protect employees who are misclassified as independent contractors as well as independent contractors improperly treated as employees, and provide critical support for employers who play by the rules,” said state Labor Commissioner Robert Asaro-Angelo.
Bad News for Freelancers?
Most of the legislative package that Governor Murphy signed appears aimed at giving New Jersey authorities the power to deal with companies that misclassify workers and improving access to resources and remedies for workers who have been misclassified.
The legislation does make it clear that freelancers can be held liable for tax evasion, but these laws don’t seem to contain any details that dim the prospects for New Jersey freelancers—unlike the freelance laws in California.