New Jersey DOL cites, fines Katerra sub for wage violations

Dive Brief:

The New Jersey Department of Labor & Workforce Development (NJDOL) has issued a stop-work order to subcontractor REB Construction and Maintenance LLC for failure to take the proper deductions from its employees' pay and for not keeping the required payroll records related to work performed on a project in Jersey City, New Jersey. The department also fined REB $19,250.
The NJDOL said that the Bound Brook, New Jersey, contractor, who was working for general contractor Katerra, paid seven employees with cash or checks but did not take deductions from that pay. The department ended up citing REB for failure to maintain records but also for failure to pay payroll taxes, improper classification of construction workers and failure to carry workers’ compensation insurance. Katerra has since replaced REB on the Jersey City project, according to the NJDOL's press release.
The authority that the NJDOL has to stop work on a construction project when significant pay, benefits or other workers’ rights violations are documented is part of new legislation based on the July 2019 recommendations of New Jersey Gov. Phil Murphy's task force on employee misclassification.

Dive Insight:

The task force's report found that employee misclassification was most rampant in construction, janitorial services, home care, transportation, trucking, delivery services and other types of businesses that offer low pay for those in labor-intensive positions. The NJDOL found that 12,315 state workers were misclassified in 2018. This resulted in $462 million in underreported wages and $14 million in lost contributions to unemployment, disability, family leave and workforce programs.

Murphy signed six new bills based on the report's findings. They are:

Stop-work orders (A5838): The NJDOL can force an employer to stop work if it determines that the employer violated state wage, benefit or tax laws.

Penalties for misclassification of employees (A5839): The department can charge the offending company an administrative misclassification penalty of 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. Additionally, the bill allows for a penalty of 5% of the misclassified worker's gross earnings during the prior 12 months. These funds will be held in trust for the workers or the employer will sometimes be directed to pay the affected workers directly.

Joint liability for payment of employer tax law (A5840): Specifies when more than one employer — like a general contractor and subcontractor — is responsible for violations of wage, hour or tax laws.

Posting requirements regarding employee misclassification (A5843): Requires employers to post notices about employee misclassification. The notices must display information about misclassification being prohibited; the standard differentiating between who qualifies as an employee and independent contractor; employee protections and benefits; remedies for misclassified workers; and NJDOL complaint contact information. Violation of this regulation carries with it a penalty of up to $1,000.

Posting of information about those who violate state wage, benefit and tax laws (S4226): Allows the NJDOL to post information about companies and individuals who violate state wage, benefit and tax laws. Companies get 15 days' notice before the department posts their violations on its website. Until the violation and the associated penalty is resolved, violators cannot contract with public entities in the state.

Data sharing between the NJDOL and the state treasury (S4228): Allows the state treasury to share information for NJDOL's labor market research or an investigation in connection with state wage, benefit and tax laws.

New Jersey is one of several states that have passed laws regulating the use or classification of independent contractors.

At the beginning of the year, for instance, California's new independent contractor law went into effect. It codified the ABC test that employers in the state must use to determine whether a worker is an employee or an independent contractor. The three-part test takes into account whether or not workers are allowed to perform their duties free from the control and direction of the employer; offer services that are outside the hiring contractor's normal scope of work; and whether the worker typically offers its services to other customers.