New Jersey: State Grip Tightens on Employee Misclassification Violations

On July 8, 2021, New Jersey enhanced employment protections through a series of new laws aimed to prosecute misclassification of employees as independent contractors.

• A-5890/S3920 allows the labor commissioner to immediately seek a court injunction against alleged misclassification practices, rather than through traditional administrative law proceedings. It also allows the commissioner to issue stop-work orders across all worksites, not just where a violation occurred.
• A-5891/S3921 creates the Office of Strategic Enforcement and Compliance within the Department of Labor and Workforce Development (DOLWD) to enforce state wage, benefit, and tax laws.
• A-5892/S3922 expands insurance fraud under the New Jersey Insurance Fraud Prevention Act (NJIFPA) to include insurance premium evasion that occurs when misclassifying employees. Penalties are $5,000 for the first violation, $10,000 for the second violation, and $15,000 for each subsequent violation.

The newly designated powers of the commissioner allow for more swift and far-reaching prosecution of violators. Employers should take care with independent contractor designations to avoid potential work shutdowns and penalties.

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