Recent New Jersey laws aim to combat worker misclassification

On July 8, Governor Murphy signed four bills into law that are intended to help the state identify and penalize employers who misclassify employees as independent contractors: 

• A-5890/S-3920 imposes additional administrative constraints on and penalties for employers.  One prominent way is by enhancing the use of stop-work orders. For instance, once a stop-work order is final, employers must pay employees for the first ten days of work they lose because of that order. In addition, a stop-work order may now be deemed final if an employer fails to request an appeal within 72 hours. Furthermore, if an employer fails to pay wages owed, the Commissioner may assess a civil penalty of US$5,000 per day for each day that the employer conducts business operations that are in violation of the stop-work order.  This law took effect immediately upon passage. 
• A-5891/S-392, which also was effective immediately on passage, creates a new office, the Office of Strategic Enforcement and Compliance, to coordinate with other state agencies to help enforce state wage, benefit, and tax laws. Among other things, this office will preliminarily review any business seeking state assistance to ensure it is complying with applicable wage and other laws.  
• A-5892/S-3922 is intended to “streamline[ ] the identification of employee misclassification” by facilitating information sharing between various state agencies, and by making it a violation of the New Jersey Insurance Fraud Prevention Act to misclassify employees for the purpose of evading insurance premium payments. This law takes effect on January 1, 2022. 
• A-1171/S-1260 creates a statewide, publicly accessible database of payroll information that contractors are required to submit to bid on public works projects.  This law also takes effect on January 1, 2022.

These laws continue efforts to address worker misclassification that Governor Murphy began as early as May 2018 when he created his Misclassification Task Force, which paved the way for his first round of misclassification laws in January 2020 (A-5839; A-5843; A-5840; and A-5838), which also strengthened enforcement efforts and laid the groundwork for the 2021 laws. 

In view of this recent legislation, New Jersey employers should re-examine their independent contractor agreements, business models, and policies to ensure that they are not at risk for liability under these new laws. If you need help or have questions about how these new laws affect your business, please contact an author of this post or the Hogan Lovells lawyer with whom you typically work. 

Authored by David Baron and Shannon Finnegan*.

*Shannon Finnegan, an author of this post, is a Law Clerk in the New York Office.