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.

 

NJBIA Members Can Download Our Free Misclassification Fast Facts Compliance Brief

 

“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.

7 responses to “Murphy Ramps up Crackdown on Employee Misclassification”

  1. Lynn says:

    This will put small businesses OUT of business. Way to go Murphy! Small businesses are the lifeblood of the economy and you are begging for us to leave the State of NJ!!!!

  2. Jim says:

    It’s all about tax collections. No morr and no less. Another reason to leave the state even if tou have all employees on payroll.

  3. Nikesyrena says:

    Go to any beauty parlor and every chair is run by an “independent contractor”. Really. Pushing the independent contractor designation and the management employee designation ought to sometimes result in the old adage coming true…pigs get slaughteted.

  4. R Costello says:

    Murphy is protecting the Organized Labor (read that as Union) way of life. More inflatable rats on the non union worksites will become the norm. All payback for getting Murphy elected.

  5. Patrick Deo says:

    This is on top of Senate Bill 1790 which just was passed. I don’t recall seeing anything from the association about this damaging bill to business

  6. Dennis R says:

    No wonder NJ ranked 36th in CNBCs America’s Top States for Business. I can understand fines and paying back wages but I civil action and stop work orders are a bit much.