The New Jersey Employment Law Firm Blog
New Jersey Employees have a vast array of rights thanks to the state’s expansive employment laws. The New Jersey State Wage and Hour Law (WHL), for example, requires employers to pay a minimum wage and overtime to non-exempt employees. Independent contractors are not entitled to these types of protections, and thus employers sometimes try to falsely classify workers as such. New Jersey takes employee misclassification very seriously and grants employees the right to bring civil lawsuits to recover unpaid wages and other damages. In addition, the Department of Labor and Workforce Development (LWD) frequently pursues administrative enforcement actions. Employers in the construction industry could even face criminal penalties for misclassifying employees as independent contractors.
The WHL and other laws allow employees to sue for misclassification. New Jersey has two statutes that impose administrative penalties and other consequences on employers that misclassify workers:
- A law passed by the state legislature in 2019 that establishes administrative penalties for most employers in the state; and
- The Construction Industry Independent Contractor Act (CIICA), passed in 2007, which imposes criminal penalties on supervisors, managers, or other individuals who misclassify construction workers. The severity of the penalties depends on the circumstances.
The 2019 misclassification law does not define the terms “employee” or “independent contractor.” New Jersey courts have adopted the “ABC test” to determine whether a worker should be classified as an independent contractor or employee. This test is favorable to employees and requires the employer to meet strict criteria in order to classify a worker as an independent contractor. The LWD has proposed adopting the ABC test in all its misclassification cases. The CIICA already includes the ABC test in its definition of “employee.”
Under the ABC test, a worker is presumed to be an employee unless the employer can establish three elements:
- The worker is free from the employer’s control;
- The worker’s services are outside of the employer’s usual business or away from its places of business; AND
- The worker has their own “independently established” business or trade.
The 2019 law imposes the following penalties for violations of “a State wage, benefit and tax law” that involves employee misclassification:
- Up to $250 per employee for a first violation, or up to $1,000 per employee for a subsequent violation; AND
- Up to 5% of the employee’s gross income for the previous twelve-month period.
Under the CIICA, misclassification is a disorderly persons offense punishable by a fine of $100 to $1,000 and a jail sentence of ten to ninety days. This penalty may apply even if the misclassification was accidental.
If the LWD finds that a construction employer knowingly misclassified an employee — meaning they knew they should have classified the worker as an employee but failed to do so — the responsible person could face criminal liability. The level of the offense depends on the amount of the construction contract:
- $2,500 or less: Crime of the fourth degree
- $2,501 to $75,000: Crime of the third degree
- $75,001 or more: Crime of the second degree
Knowingly misclassifying a construction worker can also result in ineligibility for state construction contracts.
The employment lawyers at the Resnick Law Group are passionate advocates for New Jersey and New York workers. They represent individuals in claims for employee misclassification and other violations of state and federal employment laws. To schedule a confidential consultation to learn how we can help you, please contact us today online or at 973-781-1204.