New Jersey Expands Fines and Enforcement for Employee Misclassification

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New Jersey Expands Fines and Enforcement for Employee Misclassification

On July 8th, 2021, three new laws in New Jersey were officially signed into law implementing new enforcement actions and penalties for employers who misclassify workers as independent contractors. These include greater fines and potentially full workplace shutdowns.

The first two laws go into effect immediately and will give the New Jersey Department of Labor and Workforce Development (NJDOL) the power to perform legal enforcement upon businesses found to be in violation of the state’s Unemployment Compensation Law (“UCL”). This includes stop-work orders, during the first ten days of which employees must be paid, and fines of $5,000 for every day an employer chooses to ignore an order from NJDOL.

Though New Jersey labor officials already had the power to issue stop-work orders, the new powers granted to the NJDOL apply to all of an employer’s facilities, not just the worksite found to be in violation. The NJDOL is now permitted to issue wage claims on behalf of all workers who have not been paid in compliance with state law and issue fines of at least $1,000.

These laws will also create an Office of Strategic Enforcement and Compliance within the NJDOL that is charged with investigating all claims of misclassification and coordinating between NJDOL and other state agencies. The third law will go into effect at the beginning of the next year and will allow misclassification of employees to be treated as insurance fraud, institute new penalties, and streamline enforcement.

These new laws will have a significant impact on New Jersey employers who utilize the often-misused independent contractor model. With these new enforcement actions and the potential penalties that may be applied, it may be worth thinking twice whether classification as an independent contractor is really correct for any given worker.