TRENTON, NJ – Governor Phil Murphy signed a four-pronged approach to stopping employee misclassification in hopes of workers and employers in New Jersey are treated fairly. According to the Governor's office, misclassification is the practice of illegally and improperly classifying employees as independent contractors.
“Workers who are misclassified as independent contractors miss out on fair wages and benefits,” said Murphy. “These business practices are unfair, abusive, and illegal and they cannot be tolerated. Today’s action will give the state more tools to root-out and prevent misclassification."
Employee misclassification can be seen as a method to deprive workers of the right to earn minimum wage and overtime, workers’ compensation, unemployment, earned sick leave, job-protected family leave, temporary disability, and equal pay, and leaves them unprotected against discrimination. The Governor's office said misclassification also hurts the vast majority of employers who play by the rules, by putting them at a competitive disadvantage against those who flout the law.
“For too long, some contractors working for the state have been less than forthcoming about how they’re paying their employees,” said Senator Troy Singleton (D-Burlington.) The creation of a centrally located, publicly available, database of payroll certifications will go far to ensuring that workers are being paid proper wages when working on public contracts. That is good for the workers and taxpayers alike, and I’m pleased to see the measure now signed into law.”
Under one of the laws, a new Office of Strategic Enforcement and Compliance within the Department of Labor (DOL) will be created and the agency DOL will create a database to track payroll projects, critical steps to tracking and eliminating misclassification. The measures will simplify the process for identifying misclassified workers and implement stop-work orders at worksites where misclassification is identified.
“It is necessary to increase the Department of Labor's enforcement powers. We have seen far too many violations of State wage, benefit and tax laws,” said Assemblyman Anthony Verrelli (D-Mercer) who sponsored one of the new laws to "further the department’s responsibility to mitigate bad actors from misclassifying employees and lessen violations against laws previously enacted.”
“Misclassifying workers as independent contractors just to get out of paying insurance premiums harms hard-working people who deserve the same benefits and protections as other company employees,” said Assemblywoman Shavonda Sumter (D-Passaic). “Not only will misclassification for the purpose of evading insurance premiums be a violation of our state’s Insurance Fraud Prevention Act, but this law will also provide additional resources to help streamline the identification of employee misclassification."
In 2018, a Department of Labor audit found more than 12,300 cases of workers being misclassified, resulting in more than $460 million in underreported gross wages and $14 million in lost state unemployment and temporary disability contributions. The audit covered just 1 percent of businesses, suggesting that the real cost of misclassification is much, much higher.
"We should all be proud that New Jersey is the best state in which to be a worker in the entire country. Because of the wages, rights and benefits New Jersey guarantees, we’re also the state whose workforce delivers the biggest value to employers,” said Labor Commissioner Robert Asaro-Angelo. "The action taken by the Governor here today will only bolster New Jersey’s workforce -- the employees who deserve the protections put in place for them – and the employers who play by the rules and properly classify their workers.”
Governor Murphy previously signed an executive order creating a Misclassification Task Force to determine the scope of the problem and propose measures to alleviate it. The Task Force was the result of a partnership between the Administration, the Legislature, and key labor and workforce stakeholders, that subsequently led to laws stiffening penalties and providing new enforcement tools to tackle misclassification.