New Jersey passed significant legislation in 2019 taking on wage theft by employers. The new law provides not only civil and administrative penalties, but also criminal consequences for employers that fail to pay their employees what they are owed. A series of bills passed in early 2020 addresses New Jersey employee misclassification, a related issue that deprives employees of their legal rights. Misclassification can also cause underfunding of important state programs, including the unemployment and disability insurance funds. One of these bills amends the wage theft law to add new means of holding employers liable for violations of state employment tax laws due to misclassification. This new law does not provide employees with a cause of action, but it benefits them by allowing state regulators to ensure employers are paying their share of employment taxes.
Employee Misclassification
Employee misclassification effectively strips workers of legal protections. Multiple statutes at the federal, state, and local levels protect employees by, to name only a few, guaranteeing a minimum wage and overtime compensation, regulating workplace safety, and prohibiting workplace discrimination and harassment. Legal protections for independent contractors are limited to the rights enumerated in their contracts and the general principles of contract law. Some employers see an incentive to classify workers as independent contractors when they are actually employees, since they owe fewer legal duties to independent contractors.
Employers contribute to multiple programs that benefit employees through the payment of employment taxes. At the federal level, this includes a share of payroll taxes that go to the Social Security and Medicare programs. State employment taxes fund unemployment insurance, disability insurance, and workers’ compensation. Misclassification results in employers not contributing to these programs, potentially leaving them without adequate funding. Since independent contractors are considered “self-employed,” it can also result in misclassified workers having to shoulder their employers’ share of those taxes themselves.
Wage Theft and Misclassification Laws
The New Jersey Governor signed S1790 into law on August 6, 2019. The bill made several important amendments to the state’s wage and hour laws. It added a new section to the New Jersey Revised Statutes, § 34:11-58.2, that directly addresses one method employers often use to misclassify employees and engage in wage theft. When a staffing company contracts with a client company, both companies might dispute being a worker’s “employer.” The section added by S1790 allows courts to hold labor contractors and client companies jointly and severally liable for minimum wage and overtime violations.
On January 20, 2020, the governor signed A5840 into law. This bill amends § 34:11-58.2 to add joint and several liability for violations of the following state employment tax laws:
– The workers’ compensation law;
– The unemployment compensation law;
– The Temporary Disability Benefits Law; and
– The New Jersey Gross Income Tax Act.
It also establishes that labor contractors and their clients may be held jointly and severally liable for misclassification of employees.
If you need to speak to an employment attorney about employee misclassification in New Jersey or New York, please contact the Resnick Law Group today online, at 973-781-1204, or at 646-867-7997 to schedule a confidential consultation with a member of our team.