I have written a few times on the new, very aggressive, enforcement measures that the New Jersey legislature has recently taken on the issue of misclassification. On this troubling note, I just read an article where other management-side employment law attorneys also recognize that these so-called workplace protection laws can do tremendous damage to their clients and may have the unintended consequence of causing businesses to fold or flee the State. The goal, it seems, is to replenish the Unemployment Insurance compensation fund which has been badly depleted by payments emanating from the waves of unemployment resulting from COVID-19.

The attorneys, as have I, have focused on the new laws passed several weeks ago which have made a tough situation for employers even tougher. These laws provide for stop-work orders at all of an employer’s locations, not merely the “offending” one (i.e. where misclassified workers are being used) and heavy, daily, fines for entities that do not adhere to a shut-down order.

Although the proponents of law praise it as a means to further protect workers, under our view, the management view, the laws are unusually harsh, even for an Administration that has been markedly pro-employee and a hard place for employers to do business in, much less thrive. As one commentator aptly noted, “a small employer who gets hit with one of these could easily be put out of business.” The laws are targeting the construction industry and other industries “suspected” of being permeated with misclassification, such as trucking and health care.

The push for more enforcement has been on the radar for employment attorneys for some time now, as the State must replenish billions of dollars it paid out in UI benefits this last eighteen months. Other commentators have also noted the State’s need for replenishing UI funds as the motivation for these draconian measures. There have been more than one million UI claims filed between March-June 2020, when the pandemic raged and that led State authorities to realize even more that a great deal of money was being “lost” through alleged misclassification. The four statutes, all enacted July 8, 2021, add to the misclassification legislation that had already been enacted by this Administration.

The Takeaway

The New Jersey Department of Labor now has greatly enhanced abilities to go after employers it believes are not properly classifying employees. In this regard, the agency may take employers to court and seek injunctive relief as well as attorney fees. Such attacks would increase legal costs for employers dramatically. The agency, as another commentator noted, is sending “a message to employers that the DOL has greater authority and additional remedies at its disposal.” If proof was needed, the agency (on August 10) raided a Jersey City construction site under the powers given to it under the law and shut the work down.

I’m afraid it’s only the beginning…