The state of New Jersey kicked off 2020 with a number of new employment laws focused on independent contractor misclassification and mass layoffs, including a new law imposing joint and personal liability on owners, directors, officers, and managers who violate New Jersey wage and hour and tax laws. These changes to the laws will have a substantial impact on nearly all employers in the state.
2020 New Jersey Independent Contractor Misclassification Laws
The array of new laws aim to address improper worker classification as independent contractors, rather than as employees. New Jersey’s measures include informing workers of their rights, allowing for new penalties against employers, expanding liability for violations, and even shaming employers by publishing their violations online.
Nearly all of these classification laws took effect on January 20, 2020. These laws define an "employer" consistent with applicable state wage, benefit and tax laws, and effectively cover any employer that employs any person in New Jersey.
New Jersey employers must now post notices, in a form to be issued by the Commissioner of New Jersey's Labor and Workforce Development ("Commissioner" or "LWD"), that will explain:
- Prohibitions against employers misclassifying employees;
- Definitions of employee versus independent contractor under state law;
- Benefits and protections of the state wage, benefit, and tax laws;
- Remedies available to misclassified workers; and
- Information on how a worker or a worker’s authorized representative may contact the Commissioner to file a complaint regarding possible worker misclassification.
Further, this new law introduces a host of protections for employees who raise concerns about independent contractor misclassification, such as prohibitions on employers discharging or in any other manner discriminating against an independent contractor for making an inquiry or complaint about possible worker misclassification.
The law also provides a private cause of action for workers who face retaliation. Employers who violate this law may be found guilty of a disorderly person's offense, and subject to fines between $100 and $1,000. And, if an employer discharges or otherwise takes discriminatory action in violation of this law, the employer must offer to reinstate the discharged employee or otherwise correct the discriminatory action.
The law also requires the employer to pay the aggrieved employee for any lost wages and benefits, reasonable legal costs, and punitive damages of up to two times the amount of lost wages and benefits, under penalty of contempt proceedings for failure to comply.
- This law becomes effective April 1, 2020 and applies to employers as defined by state wage, benefit and tax laws.
The Commissioner of New Jersey’s Labor and Workforce Development ("Commissioner" or "LWD") may assess an administrative misclassification penalty against employers in the amount of $250 per misclassified worker for first time violations and $1,000 per misclassified worker for subsequent violations.
The law also provides that the Commissioner may assess a penalty providing for a misclassified worker to receive up to 5 percent of the worker’s gross earnings over the past 12 months. It is in the Commissioner's discretion to determine if the penalty should be paid directly to the worker or if the penalty should be paid to the Commissioner to be held in trust for the individual.
- A penalized employer may request a hearing within 15 days following receipt of the notice of penalty.
- This law became effective as of January 20, 2020 and applies to employers as defined by state wage, benefit and tax laws.
Joint and Personal Liability for Payment of Employer Tax Law
Client employers and any labor contractors providing client employers with workers are now jointly and severally liable for violations of New Jersey's wage and hour laws and tax laws, including provisions of those laws regarding the misclassification of workers. Additionally, the law now imposes liability for violations of New Jersey’s wage and hour and tax laws on owners, directors, officers, and managers who violate those laws while acting on behalf of an employer.
- For purposes of this law, a client employer is a business entity, regardless of its form, that obtains or is provided workers, directly from a labor contractor or indirectly from a subcontractor, to perform labor or services within its usual course of business, but not a contractor or subcontractor that enters into a contract subject to the New Jersey Prevailing Wage Act.
- A labor contractor is any individual or entity that supplies, either with or without a contract, directly or indirectly, a client employer with workers to perform labor or services within the client employer's usual course of business, except that "labor contractor" does not include a bona fide labor organization or apprenticeship program, or a hiring hall operated pursuant to a collective bargaining agreement.
- This law became effective on January 20, 2020.
If the Commissioner concludes that an employer violated any state wage, benefit, or tax law, the Commissioner may issue stop-work orders, which suspend the employer’s operations at the locations where the violations occurred. LWD must serve notification of its intent to serve a stop-work order at least seven days prior to its issuance, and a business subject to such an order may file an appeal to the Commissioner within 72 hours of receipt of the notification.
- Within seven business days of receipt of a notice of appeal, the Commissioner must hold a hearing on the contested stop-work order and a written decision must follow within five business days.
- If an employer conducts business in violation of the stop-work order, the Commissioner may assess civil penalties of up to $5,000 per day of violation.
- This law became effective on January 20, 2020 and applies to any employer that employs any person in New Jersey.
The LWD may now post on its website the name of any person or entity (including, but not limited to, a company corporate officer or principal, corporations, contractors, and subcontractors) found to be in violation of any state wage, benefit, or tax laws and against whom the Commissioner or other appropriate agency officer has issued a final order for any violation of state wage, benefit or tax laws.
- This law became effective on January 20, 2020 and applies to final orders issued on and after the effective date.
Tax Data Sharing
The kinds of information the Director of the New Jersey Division of Taxation may share with the LWD so as to assist with LWD investigations has been expanded to include tax information statements, reports, audit files, returns, and reports of any investigations.
- This law became effective on January 20, 2020 and applies to employers as defined by State wage, benefit and tax laws.
Severance for Mass Layoffs
New Jersey has also updated portions of the Worker Adjustment and Retraining Notification Act (NJ WARN Act). These updates take effect on July 19, 2020 and make New Jersey the first state to require employers to pay severance in the event of mass layoffs.
Key Provisions of the NJ WARN Act
The NJ WARN Act applies to an individual or business entity that has employed 100 or more employees for longer than three years at an establishment, which includes a single location or a group of locations in New Jersey. The law is triggered if:
- An establishment terminates or transfers its operations during any continuous 30 day period that results in the termination of 50 or more employees; or
- The employer conducts a "mass layoff" - defined as a reduction in force (not the result of a transfer or termination of operations) that results in the termination of 50 or more employees (either full- or part-time) at any group of locations within New Jersey, including employees who "report to" a location in New Jersey, but who do not themselves physically work in New Jersey.
NJ WARN now requires employers to provide notice of a workplace shut down or mass layoff at least 90 days in advance of the event, up from the previous 60 days’ advance notice mandate. This notice requirement also applies if, in the aggregate over the course of a 90-day period, the groups of impacted workers from a termination or transfer of operations or mass layoffs meet or exceed 50 employees.
- If NJ WARN is triggered, in addition to providing 90 days' notice, the employer must provide all terminated employees severance pay equal to one week of pay for each full year of employment per employee. If the employer fails to provide impacted employees with the full 90 days’ notice required by NJ WARN, it must now pay employees an additional four weeks of severance.
- Employees may not waive their right to severance under this law without approval by the Commissioner or a court of competent jurisdiction.
Additionally, the law now includes a section that restricts businesses with 50 or more employees from conducting layoffs of certain employees in the event of a "change of control," such as a change of ownership. During the 180-day "transition period" after a change in control, and for an additional two years after that transition period ends, covered successor employers are prohibited from laying off any covered employees without the approval of the Commissioner.
However, a successor employer may terminate an employee for cause consistent with any applicable collective bargaining agreement during the two years after the transition period.
- Managerial, supervisory, confidential, temporary, and part-time employees are not covered employees under this provision of NJ WARN.
Compliance with this expansive new set of employment laws should be on every New Jersey employer’s list of priorities for 2020. Now is the right time to ensure that New Jersey workers are properly classified as employees or independent contractors.
Additionally, employers contemplating sizeable layoffs in New Jersey must take care to comply with the changes to NJ WARN if applicable, as of July 19, 2020. As with any other change to state employment laws, advance planning is critical to NJ WARN Act compliance.