Gov. Murphy signs legislation to protect New Jersey workers, employers from unlawful misclassification

NEW JERSEY – Governor Phil Murphy Thursday signed a four-bill legislative package furthering state efforts to stop employee misclassification.

Misclassification is the practice of illegally and improperly classifying employees as independent contractors. This practice deprives workers of the right to earn minimum wage and overtime, workers’ compensation, unemployment, earned sick leave, job-protected family leave, temporary disability, and equal pay, and leaves them unprotected against discrimination. It also hurts the vast majority of employers who play by the rules, by putting them at a competitive disadvantage against those who flout the law.

Through these action, a new Office of Strategic Enforcement and Compliance within the Department of Labor (DOL) will be created and DOL will create a database to track payroll projects, critical steps to tracking and eliminating misclassification. The others bills in the package will simplify the process for identifying misclassified workers and implement stop-work orders at worksites where misclassification is identified.

Tackling worker misclassification has been a priority of the Murphy Administration since day one, and these efforts build on the significant progress that already has been made. In 2018, a Department of Labor audit found more than 12,300 cases of workers being misclassified, resulting in more than $460 million in underreported gross wages and $14 million in lost state unemployment and temporary disability contributions. The audit covered just 1 percent of businesses, suggesting that the real cost of misclassification is much, much higher.

During his first year in office, Governor Murphy signed an executive order creating a Misclassification Task Force to determine the scope of the problem and propose measures to alleviate it. The Task Force was the result of a partnership between the Administration, the Legislature, and key labor and workforce stakeholders, that subsequently led to  laws stiffening penalties and providing new enforcement tools to tackle misclassification. Today’s bill signings continue this progress.

“Workers who are misclassified as independent contractors miss out on fair wages and benefits,” Murphy said. “These business practices are unfair, abusive, and illegal and they cannot be tolerated. Today’s action will give the state more tools to root-out and prevent misclassification. I am honored to sign these bills today on behalf of New Jersey’s workers.”

“We should all be proud that New Jersey is the best state in which to be a worker in the entire country. Because of the wages, rights and benefits New Jersey guarantees, we’re also the state whose workforce delivers the biggest value to employers,” Labor Commissioner Robert Asaro-Angelo said. “The action taken by the Governor here today will only bolster New Jersey’s workforce — the employees who deserve the protections put in place for them – and the employers who play by the rules and properly classify their workers.”

Governor Murphy Thursday took action on the following legislation:

• A-5890/S-3920 (Verrelli/Madden, Greenstein) – Concerns enforcement of employee misclassification and stop-work order laws.
• A-5891/S-3921 (Egan, Karabinchak, Space/Madden, Oroho) – Creates “Office of Strategic Enforcement and Compliance” in DOLWD; appropriates $1 million from General Fund.
• A-5892/S-3922 (Sumter/Madden, Lagana) – Streamlines identification of employee misclassification.
• A-1171/S-1260 (Freiman, Karabincak, Verrelli/Singleton, Oroho)– Requires Commissioner of Labor and Workforce Development to create Statewide database of certified payroll information for public works projects.