Employee or Independent Contractor? Employee Misclassification is Under Heightened Scrutiny in New Jersey

Employee or Independent Contractor? Employee Misclassification is Under Heightened Scrutiny in New Jersey

It is more crucial than ever for employers to take note and ensure their compliance with existing laws pertaining to employee classification. Under Governor Murphy’s guidance, the State is cracking down on employers who misclassify their workers as independent contractors instead of employees by releasing a new report on employee misclassification and providing guidance on enforcement.  Employers are under increased scrutiny and must proceed with caution as they classify their workers.  Failure to properly classify employees could result in fines, legal action, and in the worst cases, destruction of businesses.

New Jersey’s Task Force on Employee Misclassification (the “Task Force”) was originally formed in May 2018.   The goal of the Task Force is to “promote fairness, fight against discrimination, and work to end unfair labor practices…that create an unfair advantage over companies that play by the rules and hurt our working families.” The Task Force is responsible for providing advice and recommendations regarding strategies to “combat misclassification” of employees, which includes investigating and assessing existing enforcement efforts from executive departments and agencies in the State and making recommendations to promote compliance with the law.

On July 9, 2019, Governor Murphy released a new report from the Task Force indicating that there will be increased efforts to thwart the common and unlawful practice of misclassifying workers as independent contractors instead of employees. The Governor provided new tools to assist with curtailing employee misclassification and advised that his administration has already acted on 16 of the Task Force’s recommendations.  This includes an agreement between New Jersey, Delaware, and Pennsylvania for joint investigations, information sharing, and referrals. The State already had such an agreement with the New Jersey Department of Labor and Workforce Development, New Jersey Department of Treasury, and New Jersey Department of Banking and Insurance.

New Jersey Division of Consumer Affairs investigators, involving personnel in both consumer fraud (who investigate registered businesses such as movers and home improvement contractors) and board enforcement (who oversee 48 boards such as Accountancy, Dentistry, Medical Examiners, and Cosmetology) are being cross-trained on worker classification issues. Further, the New Jersey Economic Development Authority (“EDA”) is being used to coordinate enforcement in connection with existing wage violations and employee misclassification by reviewing payroll, conducting site inspections and audits, and randomly selecting and monitoring EDA projects.

These heightened enforcement efforts mean that interactions with a State agency unrelated to wage and hour issues could result in a full-scale investigation of employers’ worker classifications. The State has indicated that employee misclassification is particularly widespread in janitorial services, transportation, trucking and delivery services, construction, and low-wage, labor-intensive job sectors. All employers should carefully review their worker classifications, but employers in these sectors should be especially carefully to properly classify their workers.

A full copy of the Task Force’s report, which discusses each of the Task Force’s recommendations and current enforcement efforts, can be found here: https://www.nj.gov/labor/assets/PDFs/Misclassification%20Report%202019.pdf.   If you have any questions or concerns about employee classification, please do not hesitate to reach out to the Employment and Labor Practice Group at Laddey, Clark & Ryan, LLP: Thomas N. Ryan Esq. (tryan@lcrlaw.com), Ursula H. Leo, Esq. (uleo@lcrlaw.com), Jessica A. Jansyn, Esq. (jjansyn@lcrlaw.com), or Nicole C. Tracy, Esq. (ntracy@lcrlaw.com). Our attorneys can also be reached by phone at (973) 729-1880.