New Jersey Employers Beware: New Penalties for Misclassification of Employees

New Jersey Governor recently signed Assembly Bill 5839, which creates penalties for violations of state wage, benefit, and tax laws in connection with the misclassification of employees. If the Commissioner of Labor and Workforce Development finds that a company has misclassified employees (for example by calling an employee an independent contractor), then, in addition to imposing any other remedies or penalties authorized by law, the Commissioner can assess and collect:

1. an administrative “misclassification penalty” up to a maximum of $250 per misclassified employee for a first violation and up to a maximum of $1,000 per misclassified employee for each subsequent violation; and

2. a penalty to be provided for the misclassified worker of not more than 5 percent of the worker’s gross earnings over the past twelve months from the employer who failed to properly classify them. The employer may be required to make these penalty payments to the Commissioner to be held in a special account in trust for the worker or workers, or paid on order of the Commissioner directly to the workers or workers affected.

This new law is effective immediately, so employees should audit their classification system and remedy any misclassifications.

This blog article is intended for general informational purposes only and should not be construed as legal advice or opinion. Contact myHRcounsel with questions concerning specific facts and circumstances.