All bark, even bigger bite: NJ's new worker misclassification protections

On January 20, 2020, Governor Phil Murphy signed into law a series of legislative packages aimed at combating worker misclassification and exploitation. The bills will bolster an already aggressive state department of labor that has the independent contractor model squarely in its sights.

Background

Misclassification is the practice of improperly classifying workers as independent contractors instead of employees. Doing so can result in substantial savings to the company—the purported employer—since the worker isn't provided with employee benefits, such as health insurance, retirement contributions, and paid time off. It also allows the company to avoid payroll taxes, unemployment contributions, and the cost of carrying workers' compensation coverage.

Opponents of the independent contractor model argue misclassification robs workers of employment protections and benefits and allows companies to abuse them by requiring them to work long hours without the protection of minimum wage and overtime requirements. Many in favor of independent contractor relationships believe New Jersey has gone and continues to go too far in its effort to stamp out the model and ignores the reality of a changing workforce that values its ability to operate independently outside of the traditional employer-employee relationship. For now, the opponents are carrying the day as evidenced by the new laws signed into effect on January 20.