N.J. Legislature Drops Hammer on Worker Misclassification and Tax Avoidance

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Governor Murphy has signed five laws, most which are effective immediately, that apply to every employer in New Jersey, regardless of size. In short, they crack down on employers that misclassify employees as 1099 workers and protect workers who complain. Employers do not pay payroll taxes – unemployment, workers compensation, short-term disability, family leave insurance, social security, Medicare – to 1099 workers. The Governor’s Task Force on Worker Misclassification estimates that small businesses and their accountants, routinely misclassify workers to avoid paying taxes.

1.    The N.J. Department of Labor and Workforce Development has been granted broad authority to investigate violations, including the power to subpoena payroll and tax records, to interview employees and to issue stop-work orders.   

2.    Employers are required to conspicuously post a notification that explains how employees can file a charge with the N.J. Department of Labor and Workforce Development and that protects employees who “make an inquiry or complain to an employer” about “possible worker misclassification.”

3.    Penalties for misclassifying workers have been raised to $250 for a first violation and up to $1,000 per misclassified employee.

4. Employers and any labor contractor they use are jointly responsible for worker classification, and any penalties and taxes owed if workers are not properly classified as employees.

5.  Name and Shame – N.J. Department of Labor and Workforce Development will post a list on its website with the names of any person found to be in violation of any State wage, benefit or tax law and whom a final order has been issued against.

Register now for a 30-miunte, no cost, Conference Call to explain New Jersey’s Worker Classification Law on March 12, 2020 at 10am. 

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