NJ Bills Set Penalties for Indep. Contractor/Employee Misclassification

TRENTON, NJ – The New Jersey General Assembly is meeting today to discuss a wide variety of bills pending before the legislative body, including two bills which pertain to “employee misclassification” – the act of terming certain workers “independent contractors” when the law says those workers are “employees.”

New Jersey is among several states which have wrestled in recent years with the distinction between independent contractors and employers, revising existing laws or enacting new ones in ways which have caused concern among adult entertainment industry employers, who have long considered adult performers independent contractors, whether those performers appear in movies, appear on webcams, or perform as exotic dancers.

The two relevant bills being discussed by the New Jersey General Assembly today are A5839 and A5843. The former concerns penalties which can be imposed on employers for misclassifying their employees, while the latter requires employers to post notices for their employees regarding employee misclassification and the recourse employees have at their disposal when they believe they’ve been misclassified.

Under New Jersey law, as revised last year, “Services performed by an individual for remuneration shall be deemed to be employment… unless and until it is shown to the satisfaction of the division that: (A) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and (B) Such service is either outside the usual course of the 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 (C) Such individual is customarily engaged in an independently established trade, occupation, profession or business.”

The language of the New Jersey statute is similar to the “ABC Test” used by the California Supreme Court to determine whether a person is an independent contractor or employee. Under the ABC Test, “a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

With that sort of ‘test’ already in place under New Jersey law, the bills being discussed today set the penalties for employee misclassification and establish a statutory requirement for employers to publish notices regarding employee misclassification and the “remedies under New Jersey law to which workers affected by misclassification may be entitled.”

Under A5839, if New Jersey’s Commissioner of Labor and Workforce Development finds that a “violation of a State wage, benefit and tax law has occurred and that the violation was in connection with failing to properly classify employees,” then the commissioner is authorized to assess and collect “an administrative “misclassification penalty” up to a maximum of $250 per misclassified employee for a first violation and up to a maximum of $1,000 per misclassified employee for each subsequent violation.”

The commissioner can also assess and collect a penalty to be provided for the misclassified worker of “not more than 5 percent of the worker’s gross earnings over the past twelve months from the employer who failed to properly classify them.” The employer may be required to make those penalty payments to the commissioner to “be held in a special account in trust for the worker or workers,” or paid directly to the worker(s) on the commissioner’s order.

Under A5843, the bill which would require employers to post notice for their employees with respect to employee misclassification, employers subject to the law “shall conspicuously post notification, in a place or places accessible to all employees in each of the employer’s workplaces” a notice which explains “the prohibition against employers misclassifying employees,” an explanation of the standard “applied by the department to determine whether an individual is an employee or an independent contractor,” the “benefits and protections to which an employee is entitled under State wage, benefit and tax laws,” the “remedies under New Jersey law to which workers affected by misclassification may be entitled,” and information on “how a worker or a worker’s authorized representative may contact, by telephone, mail and e-mail, a representative of the commissioner to provide information to, or file a complaint with, the representative regarding possible worker misclassification.”

The bill also states that no employer “shall discharge or in any other manner discriminate against an employee because the employee has made an inquiry or complaint to his employer, to the commissioner or to his authorized representative regarding possible worker misclassification, or because the employee has caused to be instituted or is about to cause to be instituted any proceeding regarding worker misclassification under State wage, benefit and tax laws, or because the employee has testified in the proceeding.”

Employers who violate any provision of A5843 “shall be guilty of a disorderly persons offense and shall, upon conviction, be fined not less than $100 nor more than $1,000.” The bill further states that in the case of “a discharge or other discriminatory action in violation of this section, the employer shall also be required to offer reinstatement in employment to the discharged employee and to correct any discriminatory action, and to pay the employee all reasonable legal costs of the action, all wages and benefits lost as a result of the discharge or discriminatory action, plus punitive damages equal to two times the lost wages and benefits, under penalty of contempt proceedings for failure to comply with the requirement.”

YNOT will continue to track these bills and report on future developments.

Image of floor of the New Jersey General Assembly by Mr. Matté displayed under the Creative Commons Attribution-Share Alike 3.0 Unported License. Image has been cropped, resized and sharpened.