In January, the New Jersey legislature signed into law five new laws aimed at eliminating worker misclassification. The State reports that it has experienced a 40% increase of improper classification over the past decade. These laws, collectively referred to as the “Misclassification Package”, substantially increase the liability associated with improperly classifying employees as independent contractors. Each broadly extends the New Jersey Department of Labor’s (NJ DOL) ability to enforce labor-related tax laws. These powerful new compliance and enforcement tools include:
- The NJ DOL can issue a stop work order against any company deemed to be in violation of associated wage, benefit or tax laws. This includes the failure of out-of-state employers to register out-of-state payrolls with the NJ DOL. A stop work order requires the cessation of all business operations at the site where the violation occurs until the NJ DOL Commission removes the order. Businesses have 72 hours to appeal the order. Businesses that ignore the order are subject to a $5,000 fine per day.
- The new laws create liability for the employer and any person or entity acting on behalf of the employer.
- Significant penalties ranging from $250 – $1000 per misclassified worker can be applied.
- The new laws enable sharing of information between the NJ DOL and Department of Treasury to assist in wage violation investigations.
- Severe penalties now apply to retaliatory actions taken against a worker who inquires or complains about misclassification.
Companies whose workforce includes independent contractors should review the status of each of these workers in light of these new laws. nextSource compliance specialists can provide a full range of compliance services to companies at risk of misclassification. Contact us for assistance in Independent Contractor risk analysis, evaluation and validation, management, and – if needed – transition to nextSource as a payrolled employee.
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