New Jersey Strengthens Enforcement Tools To Crack Down On Independent Contractor Misclassification

Author:Mr Howard Wexler and Daniel Small
Profession:Seyfarth Shaw LLP

Seyfarth Synopsis: Governor Murphy signed 153 bills into law on January 20, 2020, including six (6) that increase enforcement mechanisms for state agencies to impose certain penalties against employers who misclassify workers as independent contractors. Some portions of the legislation are effective immediately.

Continuing his push to make New Jersey one of the most employee-friendly jurisdictions in the nation, Governor Murphy signed several pieces of legislation on January 20, 2020 to combat perceived rampant worker misclassification in the Garden State. As discussed in more detail below, these laws: (1) permit the Department of Labor and Workforce Development (“LWD”) to issue stop-work orders to employers who misclassify their workers; (2) permit the LWD to issue penalties for worker misclassification; (3) require employers to post notices for employees regarding worker misclassification; (4) impose joint tax liability on contractors who supply employers with workers deemed to be misclassified as independent contractors; (5) permit the LWD to post information concerning a person or business who violates misclassification laws; and (6) permit the Department of Treasury to share tax data with LWD for the purpose of enforcing wage and worker classification laws. Most all of these legislative efforts arise from recommendations made by the Governor's Task Force on Employee Misclassification.

We summarize a few of the highlights below.

Stop-Work Orders

The first law permits the LWD to issue “stop-work orders” to employers found to be in non-compliance with the State's various wage laws, including classification laws. The LWD may also issue subpoenas for witnesses and documents relevant for the purposes of enforcing such laws.

To issue a stop-work order, the LWD must first conduct an appropriate audit or investigation and thereby determine that the employer is in violation of its wage and classification obligations. A late amendment to the law requires the LWD to provide to the employer at least seven days' notice of its intent to issue the stop-work order.

An employer is not, however, without any recourse under this new law as it permits an employer to seek injunctive relief from a court if it “can demonstrate that the stop-work order would be issued or has been issued in error.”

This law is effective immediately.

Financial Penalties for Wage Law Violations

The second law permits the LWD to issue penalties for those employers the LWD...

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