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New Jersey Enhanced Penalties for Employee Misclassification

New Jersey Enhanced Penalties for Employee Misclassification

This summer New Jersey enacted three bills amending the Worker Misclassification Package which intensified the penalties imposed against employers that misclassify workers. The Worker Misclassification Package, originally enacted in 2020, granted the Commissioner of Labor and Workforce Development (“Commissioner”) the power to assess penalties against any employer that misclassifies its employees and to issue stop-work orders at the location where any state wage, benefit, or employment tax law violation is found.

S3920 became effective immediately and intensified the penalties as well as expanded the scope of the Commissioner’s enforcement powers. Further, the bill introduced the new enforcement ability of the Commissioner to enact stop-work orders across an entire business found to be in violation of New Jersey employment laws expanded from the previous restriction to only the location at which the violation was discovered. Moreover, the bills permit a fine of up to $5,000 per day that the employer is not in compliance with any stop-work order issued by the Commissioner.

S3921 created the Office of Strategic Enforcement and Compliance, tasked with the investigation of claims of employee misclassification and coordinate enforcement efforts within the NJDOL and across other state agencies.

S3922, effective on January 1, 2022, provides that businesses that misclassify workers “for the purpose of evading payment of insurance premiums” are guilty of insurance fraud. An employer that is found to have purposely or knowingly misclassified its employees is subject to fines starting at $5,000 for a first violation, $10,000 for a second violation, and $15,000 for each subsequent violation pursuant to the New Jersey Insurance Fraud Prevention Act.

In sum, the enactment of the three new bills has further increased the financial repercussions of the already risky gamble of employee misclassification. To discuss your employment situation to ensure compliance with all applicable federal and state regulations, please contact our attorneys.

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