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NJ Worker Misclassification Now Carries New Penalties 

Here's What You Need to Know

 

Has NJ Enacted New Additional Legislation Regarding Worker Misclassification?

Yes - Governor Phil Murphy signed a new legislative package on January 20, 2020 addressing worker misclassification.

 

What Are the Primary Goals of New Laws?

The bills are aimed at preventing employee misclassification in businesses by allowing stop-work orders against employers violating state wage, benefit, and tax law; providing assessment of penalties for violations in connection with misclassification of employees; and requiring employers to post a notice for their employees regarding employee misclassification, among others.  While most businesses don’t intentionally misclassify workers, it’s easy to do if you don’t understand what makes up New Jersey’s “ABC Test” for classifying workers.

 

What is the “ABC Test” of Worker Misclassification?

Per New Jersey Unemployment Compensation Law, a worker should be considered an employee unless all the following circumstances apply:

  1. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
  2. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
  3. The individual is customarily engaged in an independently established trade, occupation, profession or business.

Employers must understand that once an individual provides remunerated services, this constitutes employment, unless the services are exempt or the statutory requirements for the ABC test have been met.

 

What New Bills Have Been Signed Into Law?

A5838 - Enables the state labor department to issue a “stop-work order” against any business that violates the wage and hour laws by misclassifying workers.

A5839 - Concerns penalties for misclassification of employees and includes an administrative misclassification penalty to be no less than $250 up to as much as $1,000 per misclassified employee.

A5840 - Concerns joint liability for payment of employer tax law i.e. employer and labor contractor would both be jointly liable for worker classification and equally liable for penalties.

A5843 - Requires employers to post notice for employees on employee misclassification.

S4226
- Permits Department of Labor and Workforce Development to post information of person who violates State wage, benefit and tax laws.

S4228 -
Concerns tax data sharing between State Treasury and Department of Labor and Workforce Development.