Calling employee misclassification a crisis, Gov. Phil Murphy said today that New Jersey workers lost out on $46 billion in wages and benefits in 2018 because they were not properly paid and vowed to ramp up a crackdown on misclassification that is already underway.
A task force appointed by Murphy in 2018 found more than 12,300 cases where workers were misclassified, representing a total of more than $400 million in underreported gross wages and $14 million in unpaid state unemployment and temporary disability contributions.
Those figures, however, come from an audit that covered only 1% of employers, he said. Extrapolating that result over the full economy, the New Jersey Department of Labor and Workforce Development (DOL) estimates that misclassification cost workers more than $46 billion in wages and benefits in 2018 alone.
In response, Murphy said he was giving the DOL new tools to help put an end to misclassification. He also said he would sign A-108/S-2557, giving the department power to issue stop-work orders whenever an initial work site investigation finds sufficient violations.
“Undertaking this crackdown and making sure our workers are properly paid every penny they deserve has been a key priority,” Murphy said, addressing the annual convention of the New Jersey State Building & Construction Trades Council.
To that end, he noted the FY 2020 budget includes an additional $1 million for the wage and hour enforcement. He said his administration has hired the first assistant commissioner dedicated solely to the wage and hour division and brought on eight new prevailing wage investigators, with two more ready to join them. That would bring the total to 23 investigators devoted to prevailing wage and misclassification.
“Our new vision is this: It’s not enough to have good laws on the books if you don’t have a governor and leadership that’s willing to step up and enforce them,” Murphy said. “I am proud to be that governor.”
Additionally, Murphy touted new legal angles on prosecuting prevailing wage and misclassification cases. The Attorney General has created a joint civil rights and labor enforcement section to pursue civil actions for wage-law violators. As a result, one contractor had to repay $200,000 in wages and is facing a three-year prison sentence, Murphy said, and two other companies have been barred from public works in New Jersey because of violations in other states.
Misclassification often involves hiring people as contractors instead of paying them a salary. DOL has a three-part test to determine if someone is truly a contractor or should be hired as an employee, which requires tax withholding and payroll tax payments on behalf of the employer. To learn more, go to NJBIA’s Fast Facts and download the brief titled, Independent Contractors and Worker Misclassification.