By: Cristina N. Hyde, JD
On July 8, 2021, Governor Murphy reminded New Jersey residents of his commitment to address worker misclassification. By signing a four-bill legislative package he approved several administrative safeguards intended to make it more difficult to improperly classify employees as independent contractors. Through this new legislation, the Department of Labor can better ensure the fair treatment of workers and also protect employers from being disadvantaged by having to compete with those who ignore the law.
According to the Governor and supporters of the new legislation, the practice of misclassification is unfair and abusive insofar as it takes advantage of workers by depriving them of fair wages and certain benefits such as unemployment, family leave, and disability. It also places employers who properly classify their workers at a disadvantage in the competitive market.
The newly enacted laws each contain administrative tools and penalties designed to identify and address potential problems:
- Concerns enforcement of employee misclassification.
- Provides the Commissioner of Labor and Workforce Development additional enforcement options including subpoena powers and injunctive relief.
- Permits stop-work orders to be applied to all worksites of a violator.
- Provides for financial penalties for noncompliance.
- Creates an Office of Strategic Enforcement and Compliance within the Department of Labor.
- Provides that the centralized office will review any business seeking State assistance for compliance with employee compensation and benefits’ regulations as a precondition to the award of direct business assistance.
- Streamlines identification of employee misclassification by making attempts to evade payment of insurance premiums through improper classification a violation of the New Jersey Insurance Fraud Prevention Act.
- Provides additional resources for investigation of misclassification and specifics penalties for fraud.
- Requires Commissioner of Labor and Workforce Development to create a Statewide, publicly accessible database to track payroll information regarding contractors and subcontractors who bid on and perform public work.
Notably absent from the new legislative package is any substantive discussion of the ABC test; the standard upheld by the New Jersey Supreme Court in Hargrove v. Sleepy’s LLC,136 A. 3d 449, that currently governs independent contractor status. Under the current test an individual is an employee unless it can be shown that:
- The individual has been and will continue to be free from control or direction over the performance of the work performed, both under their contract of service and in fact; and
- The work is either outside the usual course of business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
- The individual is customarily engaged in an independently established trade, occupation, profession or business.
Campanella Law Office first addressed the possible codification of the ABC test on November 21, 2019, and amendments to that legislation in December 5, 2019. While codification legislation has yet to be signed into law, worker misclassification remains a priority issue and employers should review their business policies to ensure compliance with existing laws on classification and independent contractor status.
If you have questions regarding your small business, your workers and independent contractor status or have independent contractor arrangements you would like to review, do not hesitate to Contact Us.