New Year, New Worker-Friendly Laws for New Jersey

On January 21, 2020, New Jersey Governor Phil Murphy signed five items of worker-friendly legislation into law. Three of the laws address the misclassification of employees as independent contractors. The other two laws respectively authorize the issuance of “stop-work” orders for businesses with wage, benefit and tax law violations, and heighten covered employers’ obligations for providing notice of plant closings and mass layoffs.

One of the independent contractor laws, A5839, creates administrative penalties for the misclassification of employees as independent contractors, effective immediately. Employers can be fined by the New Jersey Department of Labor and Workforce Development (NJ DOL) up to $250 per misclassified employee for a first violation and up to $1,000 per employee for each subsequent violation. On top of this, employers must pay each individual misclassified employee up to 5% of his or her gross earnings during the preceding 12 months. For example, if a New Jersey business misclassified its 25-person staff earning an average of $40,000 per year as independent contractors, it could be liable to the NJ DOL and its employees in excess of $55,000.

Another new item of independent contractor legislation, A5840, makes labor contractors and client employers, like staffing agencies and the businesses to which they supply workers, jointly and severally liable for any violations of New Jersey state wage and hour and tax laws, including the misclassification of employees as independent contractors. In addition, owners, directors, officers and managers may be held personally liable as individuals acting on behalf of the contractor or employer. This law is also effective immediately.

The final independent contractor-related law, A5843, requires employers to prominently post notices regarding employee misclassification. While the precise content of the posting has yet to be determined by the NJ DOL Commissioner, it will contain explanations including the prohibition against misclassifying employees as independent contractors, the guidelines for determining whether someone is an employee or independent contractor, the benefits and protections employees enjoy under state wage, benefit and tax laws as opposed to independent contractors, and possible remedies for employees who have been misclassified as independent contractors, including information on arranging inquiry meetings with an NJ DOL representative. The law also prohibits retaliation against workers who inquire into or make complaints regarding possible misclassification. It will take effect April 1, 2020.

As for the last two legislation items, A5838 empowers the NJ DOL to issue “stop-work” orders to businesses with state wage, benefit and tax law violations after such violations are found and the business receives a “notification of intent” from the NJ DOL Commissioner at least seven days prior. This law takes effect immediately and subjects employers to civil penalties of $5,000 per day if they continue to conduct business operations in violation of the stop-work order.

Finally, SB3170 enacts a New Jersey state law equivalent of the federal Worker Adjustment and Retraining Notification (WARN) Act, which applies to employee notification requirements leading up to certain plant closings and mass layoffs and takes effect July 19, 2020. The new law is significantly more employee-friendly than its federal counterpart. For instance, the federal WARN Act requires businesses to give affected workers or unions 60 days’ notice of plant closings or mass layoffs. The New Jersey law requires 90 days advance notice. The New Jersey law also requires severance payments in the form of one week’s pay for each full year the worker has been employed. If employers do not abide by the 90-day notice requirement, they must give affected employees an additional four weeks of severance pay.

Stay tuned to Stevens & Lee’s Alerts and Newsletters as employee rights and employer obligations continue to develop in New Jersey and under other federal, state and local laws. In the meantime, if you have any questions about how these newly enacted New Jersey laws or any other labor and employment law developments may affect your business, please contact Megan M. Christensen, Alexander V. Batoff or the Stevens & Lee attorney with whom you regularly work.

©2020 Stevens & Lee, a Pennsylvania Professional Corporation. Richard J. Pinto, attorney responsible for the New Jersey office.

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