Even after the spate of new and aggressive employee-friendly laws passed in New Jersey in 2019, the state continues in the new year to pass employment laws that include additional restrictions and burdens on employers, in particular when it comes to the classification of independent contractors. In mid-January, New Jersey Governor Phil murphy signed a number of new laws, including the following:
- NJ DOL Now has Power to Shut Down Businesses for Violations of Wage, Benefit, or Tax Laws. This new law gives the Commissioner of Labor a very broad ability to issue a “stop work” order on employers who are found to have violated state wage, benefit or tax laws. Businesses that do not adhere to such orders may be subject to a fine of $5,000 per day. The order would require a stop of all business activities at any location where the Commissioner finds a such violation(s). The law also only provides businesses with 72 hours to appeal such an order to the Commissioner, even when the order is served at the work location itself and even if no managers or company principals receive or are even aware of the order. Before such an order is issued, businesses could still initially challenge the DOL’s findings of a violation and seek a hearing in advance of the findings being final, but this law gives heavy power to the DOL to use these stop work orders to punish or remedy violations. We will be monitoring developments, including whether the DOL issues any guidance or regulations on this new law, and whether it is challenged.
- New Fines/Penalties for Misclassification of Independent Contractors. Turning to the issue of independent contractors, the state has now added new penalties onto employers who misclassify a worker as an independent contractor under relevant state laws. On a finding of misclassification under any state wage, benefit or tax law, the Commissioner of Labor is now authorized to impose a penalty of $250 per misclassified employee for the first violation (and $1,000 per employee for each additional violation), above and beyond any penalties or remedies provided by other laws. Employers will also be required to pay up to 5% of the misclassified worker’s earnings for the past year as an added penalty.
- Joint Liability for Wage, Tax, and Misclassification Violations (including for individuals and staffing agencies). Another new law provides that where companies have an arrangement with a staffing agency or entity to provide the company with staff, both the company and the agency will have legal liability for violations of wage, misclassification, and tax laws. The law goes even further, and states that even people acting on the employer’s behalf, which includes officers or even company managers, may be held liable for such wage or tax violations.
- New Posting Requirement and Retaliation Protections for Misclassification. Effective April 1, 2020, New Jersey also now requires employers to post a notice at their places of employment that provides information regarding misclassification of workers, including information about how workers can report claims of misclassification (the DOL will issue a form notice for employers to use). More significantly, the law also provides new anti-retaliation protection for employees who claim they were misclassified, giving them the ability to bring a stand-alone legal action to claim they were retaliated against for exercising rights or making complaints regarding misclassification of contractors.
- Severance for Mass Layoffs. Finally, unrelated to independent contractors or the overtime rules, the state also amended its WARN law- a law regarding mass layoffs and plant closings. In what may well be the most employee-friendly WARN law in the entire country, effective July 2020, New Jersey now will require employers to give additional severance pay to employees in certain layoff/plant closing situations. The new law requires that businesses give at least 90-days notice to affected employees regarding the plant closing or layoff (as opposed to the 60 days previously required), requires that the severance pay to these laid off employees must equal one week's pay for each full year the worker has been employed. The law also mandates that if an employer does not give the required 90-days notice, the affected employees must receive an additional four weeks of severance pay, and the law broadens the definitions of what would be considered a covered plant closing and mass layoff.
As New Jersey (and many other states) continue to pass aggressive and employee-friendly employment laws at a lighting pace, employers should consult counsel to ensure compliance and stay up to speed with the ever-changing employment law landscape.