How the Misclassification Package Affects Business Owners
In January of this year, the New Jersey governor enacted a group of laws called the Misclassification Package. As the name suggests, these new regulations prevent businesses from incorrectly classifying employees as independent contractors.
If you own or manage a business with employees, familiarize yourself with the new laws governing employee classification in New Jersey.
Stop-work orders and investigations
The Department of Labor can issue this order preventing an employer from continuing work during a misclassification investigation or audit. Employers who fail to stop all business operations within seven days of receiving a stop-work order will receive fines of $5,000 per day. During an investigation, the DOL can access confidential tax information from the employer, including audit files, reports, statements and tax records.
Penalties for employee misclassification
If a business wrongly classifies employees, the DOL can impose fines of $250 per employee for the first offense and up to $1,000 per employee for every subsequent offense. In addition, the employee can receive a penalty equal to 5% of his or her gross earnings over the past year. If an employer fires an employee in retaliation for reporting misclassification, the employee can receive back pay, legal fees, reinstatement and punitive damages of twice his or her lost wages.
The DOL will also post an online list of employers who have received fines for misclassification violations. The list may include the company officer, contractor, corporation, association, firm or principal.
Notice posting requirement
Businesses must post a notice about misclassification in an area where workers will see it. This notice must describe the employee classification standards, rights to employee protection under state law, remedies for misclassification violations and how to report these violations to the DOL.
Under these regulations, staffing agents and employers are both liable for misclassification offenses. Whether you use a staffing agency or hire your workers directly, take steps to ensure that your business classifies employees correctly according to New Jersey state law.