New Jersey has enacted a new statute which greatly increases the employer’s risk for misclassification, as well as other violations of New Jersey’s Wage Hour laws. On August 6, 2019, acting Governor Sheila Oliver signed sweeping legislation drastically increasing the penalties for employers who fail to pay wages due under New Jersey law. This Act, which was passed by the New Jersey Legislature in late June, makes New Jersey one of the most aggressive states in the nation for wage and hour and misclassification enforcement.
The new legislation updates New Jersey’s Wage Payment and Wage Hour laws to increase penalties and enforcement. Under the new law, employers who are found to have failed to pay wages provided by an employment contract or as required by law will be liable for the unpaid wages plus 200% liquidated damages, costs, and attorney fees, plus additional fines and penalties. In addition to these penalties, “knowing” violations or retaliation against employees are now disorderly persons offenses, which subject employers to criminal penalties ranging from $500 to $1,000 and/or imprisonment of 10 to 90 days for the first offense and fines ranging from $1,000 to $2,000 and/or imprisonment of 10 to 100 for subsequent offenses. If an employer takes an adverse action, including termination, against an employee within 90 days the employee bringing a complaint to the commissioner, or a claim being brought by or on behalf of the employee in court, alleging wage theft, the adverse action is presumed to be taken in retaliation against the employee.
The legislation also allows employees to bring a cause of action in Superior Court on behalf of themselves or as a class action. The employee or class may collect wages owed plus 200% liquidated damages along with costs and attorney fees. An employment agreement or independent contractor agreement shall be no defense to such a cause of action. If an employer takes an adverse action, including termination, against an employee within 90 days of the employee bringing a complaint to the commissioner, or a claim being brought by or on behalf of the employee in court, alleging wage theft, the adverse action is presumed to be taken in retaliation against the employee and that presumption may only be rebutted by clear and convincing evidence that the action was taken for other, permissible reasons.
These penalties apply to all wage and hour violations, including findings that employees were misclassified as independent contractors. If an employer fails to provide the required employee records, there is a rebuttable presumption that the employer owes the amount of wages alleged.
The penalties are not only increased but expanded. The law increases the statute of limitations from two years to six. It also creates joint and several liability for firms that use subcontractors.
Employers will now be required to provide current and newly hired employees a written copy of a statement which will be produced by the Department of Labor of the employee’s rights under the law, with an explanation of how to file a claim or take other actions with regard to wage violations. The Act also requires the commissioner, in consultation with the Administrative Director of the Courts and the Attorney General, to produce an annual report on the enforcement of wage and hour laws with recommendations to improve enforcement, and to place on a website information regarding each wage claim in which an employer was found to have been in violation of one or more State wage and hour laws during the preceding period of not less than 12 months.
The Act amends the criminal code to include failure to pay wages as required by law to the current wage theft law. The law also establishes a “pattern of wage non-payment” as a third-degree crime, which is ordinarily punishable by 3 to 5 years imprisonment, a fine up to $15,000, or both. Employers are considered to have engaged in a pattern of wage non-payment if they are found to have knowingly failed to pay wages as required by law and have been previously convicted of failure to pay wages on two or more prior occasions.
The new law will take effect immediately, except that the portion establishing the crime of a “pattern of wage non-payment” will become effective November 1, 2019.
The impact of this new legislation is that New Jersey employers will pay an unacceptably high price for misclassification of independent contractors. Businesses engaged in 1099/Independent Contractor relationships should proactively audit such for compliance with the NJDOL’s strict standard. Werdann DeVito LLC urges New Jersey employers to ensure that they are complying with New Jersey’s record keeping requirements and that employees are being properly paid and classified.