New Jersey Cracking Down on Independent Contractor Misclassification
Author: Michael Cardman, XpertHR Legal Editor
July 15, 2021
New Jersey is going after businesses that misclassify employees as independent contractors.
With one of the strictest tests in the nation, new employee notice-posting requirements and high penalties for misclassification that were increased last year, New Jersey already was a difficult home for businesses that want to use independent contractors.
Now it will be even more difficult after Gov. Phil Murphy signed into law four bills that boost the state's capacity to investigate and enforce misclassification, and further increase the penalties for misclassification:
- A-5890/S-3920, effective immediately, provides the New Jersey Department of Labor & Workforce Development (NJDLWD) with subpoena powers, injunctive relief and other enforcement options for violations of the state's wage and hour, benefits and tax laws. This bill also allows stop-work orders to be applied to all of a violator's worksites and provides penalties of $5,000 per day for failures to comply with a stop-work order.
- A-5891/S-3921, also effective immediately, creates an "Office of Strategic Enforcement and Compliance" within the NJDLWD and provides $1 million in funding for it to oversee and coordinate the enforcement of misclassification - both within the department and with other state agencies and entities.
- A-5892/S-3922, effective in 2022, makes misclassifying employees for the purpose of evading payment of insurance premiums a violation of the New Jersey Insurance Fraud Prevention Act punishable by penalties of $5,000 for the first violation, $10,000 for the second violation and $15,000 for each subsequent violation.
- A-1171/S-1260, also effective in 2022, requires the NJDLWD to create a database of payroll certifications with the intention of ensuring that workers are being paid proper wages when working on public contracts.
"Workers who are misclassified as independent contractors miss out on fair wages and benefits," Murphy said in a statement. "These business practices are unfair, abusive and illegal and they cannot be tolerated. Today's action will give the state more tools to root out and prevent misclassification."