Governor Murphy Signs Legislative Package to Address Proper Classification of Workers
On January 21, 2020, Governor Phil Murphy signed into law several bills designed to address the proper classification of workers as employees or independent contractors by New Jersey businesses. Under the new laws, which take effect immediately, employers could be subject to penalties for engaging in intentional misclassification of workers, or could be issued stop work orders for violating state wage, benefit, or tax law.
The five new laws signed by Gov. Murphy, referred to as The Misclassification Package, greatly increases the Department of Labor’s (“DOL”) ability to enforce wage and hour laws. The five laws come with specific guidelines, but essentially cover the following:
New Jersey did narrowly escape the enactment of one of the more controversial bills, regarding the use of independent contractors with the withdrawal of S-4204, a bill that would have made a key amendment to the ABC test, which presumes a worker is classified as an employee unless all three of the ABC test criteria are met:
A. The individual is free from control or direction of the performance of service;
B. The service is outside of the usual course of business or the service is performed outside of the places of business of the enterprise; and
C. The individual is customarily engaged in an independently established trade, occupation, profession or business.
The S-4204 bill, if enacted, would have dropped the second half of item B. after the word “or,” which would have made it nearly impossible for certain employers to use independent contractors.
New Jersey employers need to be aware that improper classification of workers is now even more costly to them. These new laws highlight the Murphy administration’s concern for the rights of workers, and addresses the cost of improper worker classification to New Jersey, which totaled an estimated $14 million in unemployment and disability contributions in 2018.
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